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Shell cuts its losses by selling stake in Corrib gas field

Paul O’Donoghue - The Times

Shell has sold its remaining stake in the Corrib gas field, formally marking its exit after nearly two decades of involvement.

The UK company, one of the largest oil and gas firms in the world, announced yesterday that it had completed a deal to offload a 45 per cent interest in the gas field to a unit of the Canada Pension Plan Investment Board.

The deal, which was agreed in July last year, will include a cash payment of $958 million (€846 million), interest of $54 million and additional payments of $285 million, subject to gas prices and production from Corrib. The transaction could be therefore be worth $1.3 billion (€1.1 billion).

The deal resulted in Shell taking a sizeable financial hit as a consequence of the transaction, with an impairment charge of $350 million, which was recognised last year, and a negative currency charge of just over $400 million.

This was because the deal was done in euros, while Shell operates in dollars, so the stronger rate of the euro against the dollar has impacted the company.

The deal marks the end of Shell’s involvement in the fossil fuel exploration and production industry in Ireland. The company still maintains a presence in the country through its Shell and Topaz Aviation Ireland joint venture, which distributes aircraft fuels to Irish airlines.

The gas field, which is located about 50 miles off the northwest coast of the country, was discovered 21 years ago. Shell took a stake in the project in 2001 with the intention of developing it into a commercial gas-producing field within five years.

However, there was strong opposition to the venture, with locals citing concerns about the safety and environmental impact of the project’s onshore aspects. Many worried that the onshore pipeline would run too close to people’s homes, and would be dangerous in the event of a network failure. The project was tied up in planning for years, with An Bord Pleanála ordering Shell to move the pipeline away from homes.

The route was redesigned, but the project was more costly and took much longer to complete than had been expected. Gas finally flowed from the field at the end of 2015. Shell is now selling a huge chunk of its assets in an effort to pay down its debt.

As well as the Canada Pension Plan Investment Board, the Corrib field is now jointly owned by Equinor, the Norwegian multinational oil and gas giant, and Vermilion, a Canadian company.

Posted Date: 
3 December 2018