The Corrib natural gas field off the west coast lost €140 million last year, according to accounts filed by its operator, Shell E&P Ireland.
Global oil and gas giant, Royal Dutch Shell, is selling its 45 per cent stake in the Corrib operator to a Canadian pension fund for up to €1.08 billion.
Accounts for Shell E&P Ireland show that it lost €140 million in 2016 as the cost of running Corrib exceeded the revenues that it earned.
The figures show that the company’s sales were €182.2 million, but costs of €359.4 million and a near €10 million interest bill left it with losses of €187 million. A tax credit of €47 million reduced this to €140 million.
Depreciation accounts for a significant part of the high operating costs. As the field was producing gas at a high rate during the year, its value had to be written down. This was because the field itself was worth less because it held less natural gas.
Shell E&P sells its gas direct into the Irish market, where prices for the fuel have been falling sharply in recent years on the back of buoyant global supplies.
A report by independent supplier Vayu shows that the average wholesale price of natural gas fell 19 per cent in 2016.
They were below 30 pence sterling a therm – the unit in which natural gas is sold – for most of 2016. This was the first time in four years that they stayed that low.
Royal Dutch Shell’s loss on the Irish venture could be up to €1 billion. The deal with the Canadian Pension Plan Investment Board may earn it as little as €830 million.
However, the terms allow that to rise by a further €250 million subject to future gas prices and the field hitting certain production targets.
The three partners involved in the field, Shell, Norwegian group Statoil and Canada's Vermilion Energy, are estimated to have spent €4.3 billion on the project.
The field was discovered in 1996, but objections and protests by locals who feared the development’s impact on the environment delayed its development.