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Irish Times: Corrib field pushes Shell into red

By: Emmet Oliver, Irish Times
Published: Dec 05, 2006

Shell’s Irish arm, which acts as operator of the controversial Corrib gas field, has made a loss of almost 50 million as opponents of the project take their campaign outside Ireland.

Shell E&P Limited, the Corrib operator and 45 per cent shareholder in the field, has posted an operating loss of 49.1 million for 2005. Costs associated with the project have risen noticeably to 46.7 million from 14.8 million in the previous year. This was an increase of over 200 per cent.

The accounts reveal that the company intends to spend 81 million in the future on field. This capital expenditure was contracted for, but not drawn down during the period under review. The company employed 45 people during the period, with payroll costs amounting to 7.2 million.

The main opponent of the Corrib project, Shell to Sea, is planning to take its campaign to Norway. Statoil, which is a smaller shareholder in the field with a 36.5 per cent stake, is based in Norway. Despite the opposition, a recent opinion poll suggested 70 per cent of people in Mayo wanted the project to go ahead. The other partner is Marathon.

Shell E&P, which has other exploration licences situated in the Rockall Trough, has been the subject of most opposition to the project, even though the equity is shared with Statoil and Marathon.

The figures represent Shell’s share of the costs of the Corrib field. Its other licences are at a very early stage. Shell’s share of the Corrib field has a net book value of 266 million the accounts reveal, but its ultimate value is expected to be a multiple of this. The accounts state that its value will only known upon completion. The net book value refers to the value of an asset minus its depreciation.

The company’s profit and loss account shows accumulated losses of 90 million. However, shareholders’ funds – the amount of money owing to shareholders in the event of the company being wound up – stood at 383 million, although this was down from 423 million. The size of the shareholders’ funds reflects the level of investment that has gone into the field.

Theoretically the first gas from the field could be produced by the final quarter of 2009, but at present Shell and its partners are assessing a new route for its onshore pipeline, which will ultimately connect up a gas processing facility at Bellanaboy, Co Mayo. The accounts acknowledge that during 2005 “relationships with the local community deteriorated” and work on the pipeline and the Bellanaboy facility had to be suspended.

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