Shell exits Ireland with $1.2 billion asset sale

Oil major Shell has reached an agreement to sell its shares in Shell E&P Ireland Limited that holds 45% interest in the Corrib gas venture for up to $1.23 billion.

Shell’s affiliate, Shell Overseas Holdings Limited, has reached an agreement with CPP Investment Board Europe S.A.R.L., a subsidiary of Canada Pension Plan Investment Board (CPPIB).

Located 83 kilometers off Ireland’s northwest coast in water depths of almost 350 meters, the Corrib gas field lies approximately 3,000 meters below the seabed.

The field has a gross plant capacity of approximately 350 million cubic feet of natural gas per day, provides approximately 60% of Ireland’s natural gas consumption and constitutes approximately 95% of Ireland’s gas production.

According to Shell’s statement on Wednesday, the transaction includes an initial consideration of $947m (€830m) and additional payments of up to $285m (€250m) between 2018-2025, subject to gas price and production.

The transaction, which represents Shell’s exit from the upstream business in Ireland, is subject to partner and regulatory consents and is expected to complete in the second quarter of 2018. The transaction’s effective date is January 1, 2017. The Shell share of the Corrib gas venture’s production represented approximately 27,000 barrels of oil equivalent/day in 2016.

Shell Energy Europe Limited (SEEL) has signed an offtake agreement for some 40% of the Corrib gas venture’s production for up to three years following completion.

CPPIB will be the new Corrib Gas JV partner and Vermilion, as per the strategic partnership agreement with CPPIB, will become the new operator of the Corrib Gas Venture.

Following the transfer to Vermilion, ownership in Corrib would be as follows: CPPIB would hold a 43.5% non-operated interest; Vermilion would hold a 20% operated interest; Statoil would continue to hold a 36.5% non-operated interest.

Part of $30B divestment program

“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 program. At the half-way point, we have now announced deals valued at more than $20 billion.”

“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.”

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.”

Deasy added: “With our existing staff remaining with the asset – CPPIB as a partner; and Vermilion, as the operator, will be well placed to successfully own and manage Corrib.”

The transaction will result in an impairment charge of around $350 million, which will be taken in the second quarter of 2017. At completion, a negative non-cash Cumulative Currency Translation Difference of around $400m will be released.

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