Shell Exits Irish Gas Market in $1 Billion Deal

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Royal Dutch Shell (NYSE:RDS-A) (The Hague, Netherlands) is exiting the Irish upstream gas market and is expected to take a loss of up to $1 billion as it continues to divest assets of up to $30 billion to reduce its debt pile.

The company has agreed to sell shares in Shell E&P Ireland Limited to the European arm of the Canada Pension Plan Investment Board in a deal worth 1.08 billion euro ($1.23 billion). Shell's key asset was a 45% share in the controversial Corrib gas field, located off County Mayo on the west coast of Ireland. Canada Pension Plan Investment Board (CPPIB) (Toronto, Ontario) is the largest pension fund in the country.

The venture has been largely loss-making for the company since it came onstream in 2005 after more than a decade of local opposition, clashes between protesters, and police and court challenges. Shell said that it will take an impairment charge of $350 million and write off roughly $400 million in historical currency changes that have negatively impacted the asset's value.

Statoil owns 36.5% of Corrib gas field and Vermilion Energy (Calgary, Alberta) just under 20% after getting an extra 1.5% from the CPPIB deal to take over as operator.

"This transaction is part of our strategy to reshape Shell and to deliver a world class investment case," said Shell's Upstream Director, Andy Brown. "It demonstrates the strong momentum behind our three-year, $30 billion divestment programme. At the halfway point, we have now announced deals valued at more than $20 billion. I'm confident that Corrib will continue to deliver energy successfully to the people and businesses of Ireland."

Ronan Deasy, Shell's country chair in Ireland, said: "Shell is very proud to have led the development of the Corrib gas field. Since coming on-stream, the field and facilities have delivered exceptional performance. I would like to pay tribute to all those who have contributed to the development of this important energy project. In particular, I wish to acknowledge our staff, stakeholders and the local community who have worked closely with us over the years. 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."

Avik Dey, managing director and head of Natural Resources at CPPIB, commented: "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 and are confident that this investment will benefit the CPP Fund by delivering strong risk-adjusted returns over the long-term horizon of the Fund."

The Corrib field was discovered 21 years ago, but protests delayed operations there until 2005. The Shell share of the Corrib gas venture's production represented approximately 27,000 barrels of oil equivalent per day in 2016.

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