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Losses on Corrib near €2bn as Shell sells up

By: 
Gavin McLoughlin - Irish Independent

The Corrib gas field has left Shell and its partners in the project with losses running to the best part of €2bn to date.

Shell announced yesterday it was exiting the project in a deal worth potentially as much as €1.08bn, selling its 45pc stake in the project to a Canadian pension fund, Canada Pension Plan Investment Board (CPPIB).

The deal - which is expected to complete next year - will see Shell take an impairment charge of around $350m (€307m) and write off $400m (€350m) in historical currency movements that have impacted on its valuation of the asset.

The Irish subsidiary which held the asset already carried a €140m impairment charge from 2015.

Statoil owns 36.5pc of the project and the subsidiary it holds the stake through was sitting on accumulated losses of €1.03bn as of the end of 2015, according to accounts filed with the Companies Registration Office (CRO). The entity behind the other 18.5pc, which was bought by Vermilion Energy from Marathon Oil & Gas in 2009, was sitting on accumulated losses of €380m at the end of 2015, according to its most recently filed CRO statements.

The figures for Statoil and Vermilion are the most recent available, and so do not take account of gas production from Corrib, which started in late December 2015.

Revenues for the field for 2016 came to $589m.

Yesterday's deal sees Shell exit the controversial project after becoming involved in 2002.

It had been beset by more than a decade of delays and rows with protesters before production began.

"Shell is very proud to have led the development of the Corrib gas field," the oil giant's country chair Ronan Deasy said in a statement yesterday.

"Since coming on-stream, the field and facilities have delivered exceptional performance.

"With our existing staff remaining with the asset, CPPIB as a partner and Vermilion as the operator will be well placed to successfully own and manage Corrib."

The disposal is part of Shell's $30bn asset divestment plan, of which around $20bn has been announced.

The company had been looking to reduce its debt on foot of its acquisition of Britain's BG Group.

Shell is due to get €830m upfront for Corrib, with the rest of the price contingent in part on the field exceeding production targets, and in part on gas prices.

The deal will see Vermilion take an extra 1.5pc share of the field, as well as assuming operatorship, via the transfer of €19.4m to CPPIB. Vermilion will then own a fifth of the field. Statoil's position is unchanged.

CPPIB managing director Avik Dey said: "Ireland is an attractive destination for a long-term investor like CPPIB, and through this investment in the Corrib gas field, we are able to further our strategy of investing in high-quality natural resources assets alongside highly regarded and experienced operating partners such as Vermilion.

"Vermilion has a strong operational track record in both onshore and offshore projects, and we look forward to working with them and are confident that this investment will benefit the... fund by delivering strong risk-adjusted returns over the long-term horizon of the fund."

The Corrib field lies 83 kilometres off the coast of Mayo and has the potential to supply about 60pc of Ireland's natural gas needs.

Posted Date: 
13 July 2017