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Shell faces $900m loss on Corrib Gas Field investment

By: 
RTE News

Oil company Royal Dutch Shell lost almost €800m on its investment in the Corrib Gas Field, from which it is now planning to exit. 

Shell holds a 45% share of the gas deposits off the north Mayo coast but is to sell off its stake for more than €1 billion. 

In a statement today, it said it had reached agreement with the Canada Pension Plan Investment Board (CPPIB) to sell all of its interests for €1.08 billion.

The deal means that Shell will no longer have any involvement in the operation of the project, however it is set to leave the project with a $900m or €788m loss due to a number of factors.

The company today announced an impairment charge on its accounts of $350m in relation to the Co Mayo project. 

It sustained a further $400m loss due to the strength of the euro against the dollar. 

Its accounts also had an existing $150m loss in relation to the ongoing operation of the project. 

The losses will be covered by Royal Dutch Shell which is the parent group of Shell EP Ireland. 

Staff at the Corrib gas terminal in Co Mayo are being briefed by management about Shell's decision to sell its stake in the project.

Around 100 people are employed in Mayo and Dublin by Shell E&P in Ireland.

The company says the new operators have no plans to reduce the workforce.

The Canadian-based Vermillion exploration company - of which the CPPIB is an investor - will take over the running of the Corrib gas field when the deal is approved.

It is understood they will maintain offices in Mayo and Dublin.

 

Gas was first detected off the north west coast in the late '90s but the project to bring it ashore was mired in controversy and subject to several challenges. 

The first gas was processed at a terminal in Bellinaboy in late 2015. 

In today's statement, Shell said it is exiting the upstream business in Ireland as a result of the sale.  

The deal, which is subject to regulatory approval, is expected to be completed by the middle of next year.  

Shell's share of Corrib Gas output amounts to the equivalent of around 27,000 barrels of oil a day. 

Shell said it will retain a presence in Ireland through its aviation joint venture, Shell and Topaz Aviation Ireland Limited based near Dublin airport.

Ronan Deasy, Shell's Country Chair in Ireland, said the company is very proud to have led the development of the Corrib gas field.

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

Shell says the decision to sell its 45% stake in the Corrib gas field came about as part of a global divestment strategy.

This was initiated after the company purchased BG, formerly British Gas.

As part of that takeover it says it is simplifying its portfolio and divesting assets globally.

Green Party leader Eamon Ryan said it is interesting that Shell is selling its shares, following an announcement two days ago that it will be switching its investment to clean energy.

Speaking on RTÉ's News at One, Mr Ryan said the local community in Mayo had the misfortune to be caught up in a difficult situation as the route was worked out where gas would come ashore.

He said he thinks this will be the last instance of an off shore oil project coming ashore in Ireland.

Posted Date: 
12 July 2017