Falling gas prices knock sales for Corrib operator
Canadian firm Vermilion, which is the operator of the Corrib gas field off the northwest coast, said in its second quarter earnings report that it had locked in pricing on about 70pc of its summer European gas output “at significantly higher prices than the spot price” after prices fell due to increased LNG deliveries.
The Corrib field itself saw sales fall by 35.3pc in the first six months of this year, compared with the corresponding period last year.
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New figures show that lower gas prices and a natural decline in the gas available in the field resulted in the drop in revenues to CAD328m (€222m) between January and June of this year.
The Vermilion report said that “for the remainder of 2019, we will continue to evaluate further optimisation opportunities as we progress through our first year as operator of the Corrib project”.
The natural decline in the gas field and minor unplanned downtime at the Corrib natural gas processing facility resulted in production at the site falling by 13pc, year-on-year, in the second quarter, Vermilion said.
The production between the start of April and end of June was 4.8pc down on the previous quarter.
The decline in sales from the field chiefly arose from gas prices being down by 30pc, year-on-year.
The Vermilion report states that “since we took over as operator of the Corrib project late in 2018, operating costs have decreased 14pc over the comparative six-month period”. In December of last year, Vermilion increased its share in the gas field by 1.5pc, to 20pc.
The Corrib gas field comprises six offshore wells, as well as a natural gas processing facility on land at Ballaghboy. Last year, the former operator of the field, Shell Ireland, sold its shareholding in the project to the Canada Pension Plan Investment Board, in a strategic partnership with Vermilion.
The deal with Shell Ireland included an initial consideration of €840m, interest of €47m and additional payments of up to €250m between now and 2025, subject to gas prices and production. The other partner in the project is Statoil, which has a 36.5pc share.
The Vermilion quarterly report said that “given the significant level of investment in Corrib, and the resulting tax pools, we do not expect to incur any current income taxes in the Irish business unit for the foreseeable future”.
The Corrib partners invested more than €3.6bn in the project before gas started to flow – more than four times the original estimate of €800m.
Gas was originally expected to flow from the field in 2003, resulting in the project being 12 years behind the original schedule. Globally, Vermilion recorded sales of CAD909m from petroleum and natural gas for the first six months of this year.
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