Royal Dutch Shell will exit upstream operations in Ireland with the sale of its Corrib gas field stake to a Canadian pension fund.
The sale is part of the company’s strategy to reshape itself through a three-year, US$30 billion divestment program, through which is will focus its upstream footprint where it can add the most value.
Under the agreement, Shell affiliate Shell Overseas Holdings Ltd. will sell its shares in Shell E&P Ireland Ltd., which holds 45% interest in the Corrib gas venture, to CPP Investment Board Europe SARL, a wholly owned subsidiary of Canada Pension Plan Investment Board (CPPIB).
The transaction, valued at up to $1.23 billion, includes an initial consideration of $947 million (€830 million) and additional payments of up to $285 million (€250 million) between 2018-2025, subject to gas price and production.
Shell expects to complete the transaction in Q2 2018; the sales’ effective date is 1 January 2017. The company will retain a presence in Ireland through its aviation joint venture, Shell and Topaz Aviation Ireland, based near Dublin airport.
The company previously said it would sell $30 billion of assets between 2016-2018, including some 10% of its oil and gas production, which would involve 5-10 country exits. The company is now at the halfway point of its divestment program, with announced deals valued at over $20 billion so far, said Shell’s Upstream Director Andy Brown.
The Shell share of the Corrib gas venture’s production represented approximately 27,000 boe/d in 2016. Shell Energy Europe 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 will become the new operator of the Corrib Gas Venture.
Shell will incur an impairment charge of around US$350 million due to the sale, which will be taken in Q2 2017. Once the sale is completed, a negative non-cash cumulative currency translation difference of around US$400 million also will be released.
Located offshore the northwest coast of Ireland, the Corrib natural gas field started production in late 2015. Developed as a subsea-to-shore tieback with six wells drilled, Shell has said it expects Corrib annual production to peak at approximately 260 MMscf/d of gas, which is 45,000 boe/d.