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Shell’s Corrib bill to hit €2.5bn

By: 
Mark Paul - The Sunday Times

Accounts reveal spiralling costs of the Mayo pipeline project hit by planning delays and environmental protests

The cost of developing Shell E&P Ireland’s controversial Corrib gas field off the coast of Rossport in Co Mayo could reach up to €2.5 billion, according to well placed sources.

The project, which has been marred by years of protests and planning delays over the location of its onshore pipeline route and a refinery, had racked up costs of €1.5 billion by the end of 2008.

Accounts for 2008 for Shell, which owns 45% of the project and bears a similar proportion of the project’s costs, show it had spent €673m in capital and operating costs by the end of that year. Statoil owns 36.5% and Vermilion Energy Trust owns the remaining 18.5%. Shell’s 2009 accounts, to be filed shortly at the companies office, will show that further construction work at the refinery and on the offshore pipeline helped send the project’s costs to almost €2 billion by the end of 2009.

The cost of completing the refinery this year, along with the cost of a new onshore pipeline route through a 5km tunnel under a local bay, will push the final cost close to €2.5 billion by the time the project comes on stream some time after 2012, sources say.

Shell declined to comment on its 2009 financial results, but Terry Nolan, the company’s managing director in Ireland, said the company was keen to secure planning permission for the new pipeline route to avoid further delays and escalating costs.

“If you look at Corrib, it was discovered in 1996 and should typically have been in production within five or six years,” said Nolan. “But here we are in 2010, and we are still talking about first gas in 2012 or 2013. Our parent company [Royal Dutch Shell] is concerned by the delays we have experienced.

“Look at it as an investment: you start spending money in 1996 and you have no revenue until 2013. In what other business would you do that?” Shell is awaiting planning permission from An Bord Pleanala (ABP) for the new onshore pipeline route under Sruwaddacon Bay. This was proposed by the board, which deemed a large part of its previous route unacceptable because of its proximity to houses.

The new onshore route, which will link the offshore segment of the pipe with lands near the Bellanaboy refinery via a three-metre wide tunnel that is longer than the Dublin Port Tunnel, could add up to €100m to the project’s final cost.

Shell recently submitted a new environmental impact statement to ABP for the proposed tunnel and onshore pipe. The Department of Communications, Energy & Natural Resources tendered for consultants to assess Shell’s new plan earlier this month. The company expects to receive a decision by the end of the year.

Shell is drilling a new exploration well close to the site of the Corrib field, which is 83km off the Mayo coast.

The company hopes to find more gas at the new site, which Lorenzo Donadeo, Vermilion’s chief executive, said could be hooked up to the Corrib pipeline for €100m.

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