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Valuation of Corrib cut on gas price fall

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The Corrib gas field

The Corrib gas field

The Corrib gas field

THE operator of the Corrib gas field off the west coast of Ireland has cut the value of the asset due to falling gas prices.

Accounts for Vermilion Exploration and Production Ireland reveal that a €5.7m non-cash impairment was shouldered against the gas field in the first quarter of this year. That followed a €2.3m non-cash impairment of the assets in the final quarter of 2019.

Corrib - Ireland's first commercial gas find since the discovery of the Kinsale fields nearly 50 years ago - started production in late 2015. It comprises six wells located more than 80km offshore. The project has a long and controversial history since the field was discovered in 1996.

The field is 20pc owned by Canada's Vermilion, while the Canadian Pension Plan Investment Board owns 45pc. The pension group acquired the stake from Shell Ireland in 2017 for more than €900m.

The remainder of the field is owned by Norway's Statoil.

At peak production, Corrib generates up to 60pc of Ireland's natural gas needs.

Many countries, including Ireland, are accelerating the shift away from fossil fuels and deeper into renewables to meet green energy targets. That's having a longer-term impact on oil and gas prices, while they've also been hit by the global Covid-19 crisis.

The wholesale price of natural gas in Ireland is heavily influenced by prices in the UK, given that the two markets are deeply interconnected. The UK wholesale gas price fell to a 10-year low during the peak of the crisis there.

The latest set of filed accounts for Vermilion Exploration and Production Ireland also confirm the payment of nearly €529m in dividends during the 2018 financial year.

Nephin, the company that's used to hold the Canadian Pension Plan Investment Board's stake in Corrib, paid a €382.4m dividend to its parent firm in 2018 and paid another €32.4m last year, it was reported.

The accounts for Vermilion Exploration and Production show it generated turnover of €266.4m in 2018, compared to €257.7m in 2017.

Its operating profit in 2018 was €3.7m, compared to a €69.8m loss in 2017.

"In response to Covid-19, we have made adjustments to our operating practices, including social distancing and task redesign, to provide both for safety and business continuity in our operations during the pandemic," the accounts note.

Irish Independent