Friday, 4 December 2009

Corrib gas field cost €1.5bn in 2008

THE TOTAL spend on developing the Corrib gas field off the Mayo coast to the end of December last amounted to just under €1.5 billion.

In figures revealed for the first time by a senior source close to the project, the capital outlay to the end of December by the three partners in the project is €1.2 billion with operating costs of €277 million, bringing the total cost to more than €1.4 billion. The senior source yesterday estimated that another €500 million will be spent on developing the field before gas is produced.

Filings just returned by the lead company in the project to the Companies’ Office, Shell EP Ireland Ltd, show that it has spent €673 million on the project to the end of December last, made up of €548 million in capital costs and €125 million in operating costs.

Shell’s two partners in the project are Statoil, which has a 36.5 per cent share of the field, and Canadian-owned Vermillion, which has an 18.5 per cent share.

The field has one trillion cubic feet of gas and is expected to meet 75 per cent of Ireland’s peak winter gas needs for up to a decade.

The filings show that last year Shell EP Ireland Ltd incurred a pretax €70 million loss on the project, with administrative costs rising to €72.5 million.

Although not specified in the returns, it is understood that a major contributory factor to the increase in administrative costs was €56 million written off by Shell after the world’s largest pipe-laying vessel, the Solitaire was damaged off the Mayo coast in September 2008 and was unable to carry out its work last year. The repaired Solitaire returned last June to complete its work.

The returns also show that Shell EP Ireland has received tax credits of €48 million in the last five years from the exchequer.

The numbers employed by Shell EP Ireland rose dramatically this year, with up to 1,500 people working on the project, and salaries totalling €11 million paid each month. The onshore terminal at Bellanaboy is 80 per cent complete.

A spokesman for Shell EP Ireland yesterday said the company was happy with its performance in 2008, pointing out that there will be no income from the project until the gas is flowing.

He said that in 2009 the laying of the 81km offshore pipeline had been completed and the infrastructure for five offshore wells had also been completed. They were now ready for production.

Last month An Bord Pleanála ruled that up to half of Shell’s proposed onshore pipeline was unacceptable on safety grounds and gave it three months to provide an alternative route.

A spokesman for Shell confirmed yesterday that its consultants, RPS, will be re-examining the feasibility of routing the onshore pipeline up the Sruwaddacon estuary from an engineering and environmental perspective.

The spokesman said: “The current window for project completion is year-end 2010/early 2011. It is too early to say whether the recent correspondence from An Bord Pleanála will have an impact on this schedule.” The filings show that the company last year employed 122 people, spending €21 million on salaries.

Irish Times

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