Business Irish

Wednesday 18 July 2018

Corrib gas will be marketed by Nephin Energy

The Corrib gas field off the west coast produces 60pc of Ireland’s natural gas requirement.
The Corrib gas field off the west coast produces 60pc of Ireland’s natural gas requirement.
John Mulligan

John Mulligan

The Canada Pension Plan Investment Board, which agreed to acquire Shell's 45pc stake in the Corrib gas field off Co Mayo for up to €1.1bn during the summer, is backing a new energy company here to market gas from the resource.

Nephin Energy is being billed as "Ireland's newest energy company".

The new natural resources company will supply and sell gas from Corrib, it has confirmed.

But it's believed that the company will not be engaged in any wider entry into Ireland's corporate and retail supplier market.

It's thought that Nephin Energy will effectively replace Shell's own marketing vehicle for wholesale gas sales from Corrib.

Corrib produces 60pc of Ireland's gas needs and 95pc of all natural gas output in Ireland.

The development of the field by companies including Shell and Statoil was mired in controversy and planning delays.

It was originally anticipated that the field, located 83km off the west coast, would cost €800m to develop and that the first gas would flow from the project in 2003.

Corrib ultimately cost more than €3.6bn to develop and the first commercial gas did not flow until December 2015.

In 2009, Canadian energy company Vermilion took a stake in the Corrib project, acquiring it from Marathon Oil.

Earlier this year, Vermilion - which owns 18.5pc of Corrib - stated that the field had been performing better than anticipated. The field has a gross plant capacity of about 350m cubic feet of gas a day.

"Corrib is a highly-efficient generator of free cash flow as a result of its highly-valued European gas product, absence of royalties, low operating expense, and low maintenance capital requirements," it told investors.

During the summer, CCPIB agreed to acquire Shells 45pc interest in Corrib as the energy giant engaged in a sale of non-core assets. CCPIB is buying Shell E&P Ireland, which holds the 45pc stake.

Vermilion will operate CCPIB's stake in Corrib on its behalf.

CCPIB is paying an initial €830m for Shell's stake in Corrib. Additional total payments of up to €250m are payable contingent on gas prices between 2018 and 2022, and production thresholds being exceeded up to 2025. Following the transaction, CCPIB will hold a 43.5pc stake in Corrib; Vermilion will own a 20pc stake, and Statoil will continue to own 36.5pc.

The transaction is expected to close in the first half of 2018.

Corrib production was recently shut down for 31 days after a scheduled downtime and after odourless gas was inadvertently pumped into the gas network in the west of Ireland.

That occurred after a temporary restart of the Bellanaboy gas terminal.

As a result, gas customers in Galway and Mayo were urged to switch off their supplies for a few days.

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