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Vermilion seeks Corrib expansion

Gordon Deegan - Irish Examiner

CORRIB gas partner Vermilion expects to pay Marathon Oil an additional $135 million (€95m) in order to complete the purchase of its 18.5% share of the gas field.

In the Canadian energy firm’s 2010 annual report, the company confirms that it has already paid $136.8m in cash for the interest.

This brings to $271.8m Vermilion will pay for its share in the gas field off the northern part of the Co Mayo coastline.

In the deal, Vermilion had agreed with Marathon Oil that after the initial cash payment of $136.8m, it would pay between $135m and $300m depending on when gas came ashore.

However, because of delays in bringing the gas ashore, Vermilion is to pay $135m – last year it emerged that Marathon Oil wrote down the value of its former share in the field by €203.4m due to delays in bringing gas ashore and the ultimate price it would receive for its share sold to Vermilion.

The figures in Vermilion’s annual report show that Vermilion spent $78.4m on the field last year and this followed capital expenditure of $182.6m in 2009.

The accounts show that the company recorded a $6.9m loss last year on its Irish operations and this followed a $4.3m loss in 2009.

The annual report states that over the next two years, the Corrib project and other Vermilion exploration project "will require a significant capital investment by Vermilion".

"As such, Vermilion’s fund flows from operations may not be sufficient during this period to fund cash dividends, capital expenditures and asset retirement costs. Vermilion currently intends to finance any shortfall primarily with debt."

The annual report states: "The Corrib Gas Partners look forward to completing this strategically important project and delivering the gas to Ireland.

"At peak production, Corrib gas is expected to supply up to 60% of Ireland’s natural gas needs and is consequently expected to play an important role in Ireland’s energy security in the years ahead.

The field has one trillion cubic feet of gas and the final spend on developing the field is expected to top €2.5 billion – more than three times the original estimate of €800m.

The lead partner in the project, Shell E&P Ireland Ltd has now secured all the necessary permissions and licences to proceed with the construction of the tunnel to bring the gas ashore.

The numbers to be employed in the final phase are not as yet confirmed, but it is expected that several hundred jobs will be created during the construction of the onshore pipeline.

A Shell Ireland spokeswoman said recently that "it is anticipated that first gas will flow in 2013 at the earliest".

Construction work on the tunnel will take approximately 22 months.

The tunnel proposal to bring the gas ashore only emerged after An Bord Pleanála ruled out half of a previous pipeline proposal on safety grounds in 2009.


Posted Date: 
16 June 2011