The company is in negotiations with the Commission for Energy Regulation (CER) to develop natural gas storage facilities at its southwest Kinsale reservoir.

The CER recently completed a public consultation on the proposed regulatory regime for the operation, and a further consultation on a natural gas storage licence will start shortly, according the Department of Communications, Marine and Natural Resources. If this gets the go-ahead, Marathon's facility is expected to become operational in May of this year.

Marathon's plans come at a crucial time for the Irish government. Ireland has neither a strategic gas reserve nor facilities to store gas, but a draft energy policy paper published by the European Commission last Wednesday could eventually lead to legislation forcing EU countries to store gas in case of shortages.

More than half of Ireland's electricity is generated by natural gas, meaning the country would be vulnerable in the event of a shortage of supplies.

As part of plans to create an all-island energy market, discussions are also taking place between the Department of Communications, its counterpart in Northern Ireland and the two regulatory authorities to create a joint north-south liquefied natural gas (LNG) storage facility in Northern Ireland.

But the costs could be prohibitive. Industry sources say LNG facilities could cost hundreds of millions . . . even up to 1billion . . . to construct.