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Paperwork blunder left state exposed to Corrib gas field liabiilties

Mark Tighe - Sunday Times

An accident at Corrib could have cost the taxpayer millions

The state could have faced liabilities of many millions of euros if there had been an accident at the Corrib gas field at any time in the past 16 years, it has emerged.

An oversight meant there was no power to make Royal Dutch Shell, the project’s largest shareholder, pay compensation.

Correspondence obtained by The Sunday Times reveals that while reviewing Shell’s proposal to sell its 45% stake in the Mayo gas project for €830m last January, the government discovered that Royal Dutch Shell, the ultimate parent company of Shell Ireland, was not registered as a guarantor, as required under its lease.

A parent company guarantee (PCG) is required to give an unlimited assurance that any costs arising from a problem at the gas field and processing terminal, such as an environmental disaster, would be covered.

Officials at the Department of Communications, Climate Change and Environment were studying Shell’s proposal to sell its stake to the Canadian Pension Plan Investment Board (CPPIB) when they found that Shell’s PCG was registered in the name of Enterprise Oil, which Shell acquired when it bought the Corrib gas field in 2002.

In a letter sent in January to Ronan Deasy, managing director of Shell E&P Ireland, the department’s petroleum affairs division said the discrepancy “has come to our attention”.

It added that while Shell was in the “divestment process”, the minister did not require this problem to be “remedied immediately” but he reserved the right to require Shell to meet its lease obligations “promptly upon notice”.

As part of the proposed sale, the Canadians wanted to limit their potential liabilities to €300m but this was rejected by the department. The Canadians said that as a public pension fund they could not take on unlimited liabilities.

Shell had hoped that the Corrib sale would be complete by the end of June, but the problems with the guarantee led to a delay.

In February, while the Department of Communications was still assessing the transaction, Alain Carrier, senior managing director of CPPIB’s European operations, wrote to Paschal Donohoe, the finance minister. Carrier said he wanted to meet Donohoe “to discuss the progress being made towards completion of the Corrib investment and also future investment opportunities”.

Donohoe agreed to meet Carrier so long as Corrib was not discussed, a spokesman for the minister said.

A minute of the May 3 meeting shows no mention of Corrib, but there was discussion of other possible investment in Ireland by the pension fund.

Sources involved in the deal said the issue about a cap on CPPIB’s liability and the ultimate guarantor was settled in May. Shell is said to have agreed to guarantee any CPPIB liability in excess of €300m arising from its investment in Corrib.

The Department of Communications declined to answer questions about why it did not notice that Shell’s parent company was not a guarantor for the project until January.

Shell said: “We are working hard to complete the sale of our upstream business in Ireland, comprising the Corrib gas project. Much of the work necessary to ensure a smooth transition to the new operator has been done.”

Posted Date: 
24 October 2018