The Minister of State for Public Enterprise, Mr Joe Jacob, with Mr Robert Priddle, of the OECD's International Energy Agency, presenting the Energy Policies of Ireland report yesterday.

The Government has disagreed with the OECD's International Energy Agency on a proposal to withdraw State funding from the Whitegate oil refinery, which costs the economy about £5 million (€6.4 million) annually.

An IEA report questions continued Government support of the Co Cork facility and whether "the future of the refinery should be left to market forces". But the Minister of State for Public Enterprise, Mr Joe Jacob, said the Government would have to be careful about oil supply decisions. About 0.2p per litre of petrol and diesel at petrol pumps relates to the cost of Whitegate.

The IEA says the cost is high "in absolute terms". It has also urged that a timetable be published for the closure of the State's five peat-fired generating stations which employ about 750 people in the midlands. The Government has agreed with the EU to implement a phased closure programme of older, less efficient peat-fired plants. "It would be desirable to clarify and confirm a timetable for closing the existing peat-fired stations," the report states.

Mr Robert Priddle, IEA's executive director, questioned the consideration of security of oil supply which underpins the stipulation that oil distributors must buy 20 per cent of their supplies from Whitegate. His report recommends the Government "work towards the objective of removing the mandatory requirement for purchases".

Ensuring diversity of supply was the means by which governments could maintain the security of supplies, he said. Whitegate was "an artificial situation", likely to continue to underperform against international competition. "It is going to absorb more and more resources," he said.

But Mr Jacob said that in the context of a strong and growing economy and of an island economy, the Government would have to be "very conservative and very careful" in making decisions affecting oil supplies. "The security of supply is of huge importance. Our vulnerability in that area has been shown in the past."

Mr Priddle asked whether the Government was measuring correctly the cost of imposing interventions to maintain employment in peat stations. Peat cost 150 per cent more than coal "as a fuel cost". There was "a pressing need", he added, for the Government to make a clear statement on its role in the energy-provision market over the next decade and that players should not be concerned with "ad hoc interventions".

Mr Jacob said that while there was a memorandum of agreement with the EU on peat-fired stations, "diversity of energy sources, including peat, will be there with us for quite a while".