Shell to divest Ireland upstream assets for up to $1.23 billion

July 12, 2017
Royal Dutch Shell PLC is exiting Ireland’s upstream segment in a deal that includes its 45% interest in the Corrib gas venture.

Royal Dutch Shell PLC is exiting Ireland’s upstream segment in a deal that includes its 45% interest in the Corrib gas venture.

Shell Overseas Holdings Ltd. has agreed to sell its shares in Shell E&P Ireland Ltd. to CPP Investment Board Europe SARL, a wholly owned subsidiary of the Canada Pension Plan Investment Board (CPPIB), for as much as $1.23 billion.

Shell’s share of the Corrib venture’s production was 27,000 boe/d in 2016. Shell Energy Europe Ltd. has signed an offtake agreement for 40% of the project’s production for up to 3 years.

At closing of the deal, partner Vermilion Energy Inc. will assume operatorship of the project and intends to take Shell E&P Ireland along with an additional 1.5% working interest from CPPIB for $22 million. Following the transfer to Vermilion, CPPIB would have 43.5% interest, Vermilion would have 20%, and Statoil Exploration (Ireland) Ltd. would maintain its 36.5%.

Production from Corrib gas field, discovered in 1996 and located 83 km off northwestern Ireland, was initially expected to begin in 2003, but environmental protests and regulatory and development issues delayed the launch to late 2015 (OGJ, Nov. 17, 2008, p. 30).

The 1-tcf project includes six offshore wells in about 350 m of water and a 90-km gas pipeline linking the field to the Bellanaboy Bridge gas terminal in County Mayo. The field in 2016 reached peak production of 60,000 boe/d, or 350 MMscfd of gas.

As a result of the deal, Shell will take a $350-million impairment charge during the second quarter. The firm will retain a presence in Ireland through its aviation joint venture, Shell and Topaz Aviation Ireland Ltd. based near Dublin airport.

The agreement includes an initial payment of $947 million and additional payments of as much as $285 million in 2018-25, subject to gas price and production levels. The deal is effective Jan. 1 and expected to close in second-quarter 2018.

The move is part of Shell’s 3-year, $30-billion divestment program. Currently at its half-way point, the program has netted deals valued at more than $20 billion. Most recently, Shell divested nearly all of its Canadian oil sands interests for $7.25 billion (OGJ Online, Mar. 9, 2017).

Based in Toronto, CPPIB is an investment management organization governed and managed independently of the Canada Pension Plan and at arm’s length from governments. As of Mar. 31, the CPP Fund totaled $316.7 billion.

CPPIB’s oil and gas investments include the North America-based Black Swan Energy Ltd., Teine Energy Ltd., Seven Generations Energy Ltd., Crestone Peak Resources, and Wolf Midstream Inc.

The organization last month committed up to $1 billion alongside Encino Energy to form Encino Acquisition Partners, which will focus on US Lower 48 oil and gas acquisition opportunities.

Contact Matt Zborowski at [email protected].