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Corrib sale to proceed 'before year-end'

Rob Watts - Upstream

Shell and the Canadian pension fund planning to buy the Anglo-Dutch supermajor’s 45% interest in the Corrib gas field off Ireland have agreed to extend the deadline to complete the deal after failing to conclude the transaction by the end of June as hoped.

The Canada Pension Plan Investment Board (CPPIB), Canada's biggest public pension fund, and Shell said in recent days that they are now working to conclude the deal before the end the year.

Neither party revealed any reasons for the delay.

It was announced in July last year that a CPPIB subsidiary, CPP Investment Board Europe, had agreed to buy Shell’s interest for up to $1.23 billion, heralding the end of a troubled 15-year period of involvement with the asset for the oil company.

Under the plans, existing partner Vermilion Energy is set to become operator on behalf of CPPIB and Norway’s Equinor, the other remaining partner.

CPPIB said this week: “Closing has been extended by mutual agreement between Shell and CPPIB.

"Completion will occur once the ministerial and partner approval process has concluded, which is expected later this year.”

A Shell spokesperson said: “We are working hard to complete the sale of our upstream business in Ireland, comprising the Corrib gas project, and much of the work necessary to ensure a smooth transition to the new operator has been done.

“We expect completion of the transaction to conclude later this year.”

Ireland’s Competition & Consumer Protection Commission confirmed to Upstream that CPPIB filed on 7 August for regulatory approval for the deal, in line with the country’s mergers and acquisitions legislation.

Vermillion said recently: “We continue to work closely with CPPIB and Shell on the transition of ownership and operations of Corrib from Shell to CPPIB and Vermilion. Transition has progressed well with all technical aspects being ready. We now anticipate receiving final approvals from the necessary authorities and closing of the transaction in the second half of 2018.

“Although this closing date is later than our original expectation, and will have a modest impact on our booked production, Vermilion will still benefit from all interim period cash flows between 1 January 2017 and closing as a reduction of purchase price.”

The deal includes an initial consideration of $947 million and additional payments of up to $285 million between 2018 and 2025, subject to gas price and production.

At closing, CPPIB will transfer 1.5% of the 45% interest it is acquiring to Vermilion, leaving it with a 43.5% non-operated interest and Vermilion with 20%. Equinor retains its stake of 36.5%.

According to Vermilion, its share of Corrib production averaged 57 million cubic feet per day in the second quarter, down 7% from the first quarter due to natural decline and minor plant downtime related to external electricity supply issues.

CPPIB said last year it was attempting to diversify beyond domestic markets, which included an investment of up to $1 billion to acquire US oil and gas assets.

Avik Dey, CPPIB's head of natural resources, said when the deal was announced: “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 resource assets alongside highly regarded and experienced operating partners such as Vermilion.”

First gas from Corrib flowed in late 2015, almost two decades after the field was discovered in 1996 by UK independent Enterprise Oil, which was acquired by Shell in 2002.

The project hit severe delays amid long-running disputes with local residents and environmental campaigners.

The development comprises six subsea wells, with gas transported along a pipeline to an onshore terminal at Bellanaboy Bridge.

Posted Date: 
27 August 2018