Shell To Quit Irish Upstream, Sell Corrib Stake
Shell said July 12 it has agreed to sell its upstream interests in Ireland, which include its 45% stake in the Corrib gas field, for up to $1.23bn.
The buyer is CPP Investment Board Europe, a wholly-owned subsidiary of Canada Pension Plan Investment Board (CPPIB). It will include an initial consideration of $947m, plus additional payments of up to $285m between 2018-2025, subject to gas price and production.
Calgary-based Vermilion Energy -- Shell and Statoil's existing partner in Corrib -- will become the field's new operator upon completion expected in 2Q2018. Shell will exit the Irish upstream. It said the transaction will involve an impairment charge of some $350m, which it will take in 2Q2017.
Shell's share of Corrib production in 2016 was 27,000 barrels of oil equivalent/day (boe/d). The Anglo-Dutch major has signed an offtake agreement for some 40% of the Corrib gas venture's production for up to 3 years following completion.
Shell's Upstream Director, Andy Brown, said of the firm's three-year, $30bn assets divestment programme: "At the half-way point, we have now announced deals valued at more than $20bn. This transaction is consistent with Shell's strategy to concentrate our Upstream footprint where we can add most value. I'm confident that Corrib will continue to deliver energy successfully to the people and businesses of Ireland.
Vermilion said that, at closing, Toronto-based CPPIB plans to transfer a 1.5% working interest to Vermilion for €19.4mn.
Vermilion will then hold a 20% interest, becoming operator, while Statoil will retain its 36.5% non-operated interest. Vermilion CEO Anthony Marino said: "Our extensive experience in Europe, North America and Australia over our 23-year history will serve us well in Corrib."
CPPIB managing director and head of natural resources 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."
Corrib, offshore the northwest of the Republic of Ireland, produced first gas at the very end of 2015; its production capacity was originally cited at 260mn ft3/d (45,000 boe/d) at 100%. However the field has produced more strongly last year: 346.7mn ft3/d (60,000 boe/d, or 3.6bn m3/yr) at 100% last year, based on Shell's net figure above.
The asset until now had been seen as core to Shell. It took the best part of a decade to get the project through planning stages to production.
Update 1: Cash from the Corrib divestment could come in handy for acquisition of a floating production ship (FPSO) that Shell is to buy for $1bn from a joint venture of Dutch drillrig owner SBM Offshore (55%) and Japan's Mitsubishi Corp (30%) and NYK Line (15%). The value was disclosed by SBM on July 11. Shell added: "The Turritella FPSO has a daily production capacity of approximately 60,000 barrels of oil and 15mn ft3/d gas and fits well within Shell's global, deep-water portfolio, which includes operations in the [US] Gulf of Mexico, Brazil, Nigeria, and Malaysia." The vessel is contracted for Shell's Stones deepwater development in the US Gulf which began production in 2016.
Update 2: Irish explorer Providence Resources said July 12 that, following Irish ministerial consent, it can confirm that drilling operations on the 53/6-A well programme in the southern Porcupine basin offshore southwest Ireland have commenced. Providence is operator with 56%, partnered by Cairn 30% and UK-Danish Sosina Exploration 14%, but the partners -- who have contracted the Stena IceMAX deepwater drillship for the well -- have granted Total an option to farm into their FEL 2/14 licence within 60 days of the well's completion.
Mark Smedley