Cor­rib op­er­a­tor eyes ex­pan­sion and tax-free cash

Irish Independent - Business Week - - FRONT PAGE - Gavin McLough­lin

Ver­mil­ion En­ergy con­sid­ers ex­plo­ration of Cor­rib Deep prospect to boost po­ten­tial life of ‘world-class’ gas field

THE in­com­ing op­er­a­tor of the Cor­rib gas field has out­lined plans to ex­pand the project, while telling in­vestors that it doesn’t ex­pect to pay tax on pro­ceeds from the field.

Ver­mil­ion En­ergy said op­po­si­tion to the project had “now largely dis­si­pated”.

It said it had ac­quired $1.3bn (€1.15bn) in so-called “tax pools” as part of the deal to take over op­er­a­tor­ship.

These are as­sets de­rived from his­tor­i­cal losses on the project, which can be used to off­set tax pay­ments.

“As a cor­po­rate trans­ac­tion, the Cor­rib ac­qui­si­tion trans­ferred the as­so­ci­ated tax pools to Ver­mil­ion. Post-ac­qui­si­tion cap­i­tal ex­pen­di­tures gen­er­ated ad­di­tional tax pools,” a pre­sen­ta­tion to in­vestors ear­lier this week said.

“With cur­rent avail­able tax pools to­talling [circa] $1.3bn, we do not ex­pect to pay in­come taxes re­lated to cash flows gen­er­ated from the Cor­rib project,” it said.

The pre­sen­ta­tion to in­vestors said the ab­sence of roy­alty pay­ments, low op­er­at­ing ex­pen­di­ture and min­i­mal on­go­ing cap­i­tal ex­pen­di­ture meant the project has strong cash flows.

But it is con­sid­er­ing a boost in cap­i­tal ex­pen­di­ture over the com­ing years to try and find more gas.

The com­pany said it will look at re-drilling par­tic­u­lar wells that had by­passed re­cov­er­able gas. It’s also con­sid­er­ing ex­plor­ing a prospect known as ‘Cor­rib Deep’, which is deeper than the ex­ist­ing field.

In ad­di­tion, Ver­mil­ion said it would look to do deals with other oil and gas com­pa­nies ex­plor­ing in the wa­ters around Cor­rib, ei­ther by al­low­ing those com­pa­nies to use the Cor­rib in­fra­struc­ture to trans­port gas, or by buy­ing stakes in those com­pa­nies.

Ver­mil­ion is tak­ing over af­ter Shell ex­ited the field, sell­ing its stake to a Cana­dian pen­sion fund. As part of that deal Ver­mil­ion’s stake in the field is to reach 20pc.

The pen­sion fund and Sta­toil are the other share­hold­ers.

Cor­rib ac­counts for 95pc of Ire­land’s do­mes­tic gas pro­duc­tion and 60pc of the gas con­sumed. Af­ter the Kin­sale fields shut down pro­duc­tion in 2020 or 2021, it will be the only Ir­ish field pro­duc­ing gas.

“Cor­rib re­ally is a world-class gas field,” Darcy Ker­win, man­ag­ing di­rec­tor of Ver­mil­ion’s Ir­ish busi­ness unit, told in­vestors, adding that the com­pany saw chances to boost ef­fi­ciency at the gas-pro­cess­ing plant.

“As we’ve spent time at the plant over the last cou­ple of months get­ting ready to take over op­er­a­tor­ship, we’ve iden­ti­fied what we think are a large num­ber of lowhang­ing-fruit-type op­er­a­tional projects that we’re ex­cited to go and im­ple­ment when we be­come op­er­a­tor.

“They kind of range from sim­ple things like just op­ti­mis­ing the well-test­ing fre­quency... to bet­ter op­ti­mis­ing the main­te­nance and the turn­around plan­ning.

“I’m con­fi­dent the more time we spend there, the more op­por­tu­ni­ties we’ll be able to iden­tify.”

Mr Ker­win said the com­mu­nity around the gas plant “are now quite sup­port­ive”, with a lot of work­ers liv­ing in the lo­cal area.

He said he and a col­league hosted a din­ner for 15-20 fam­i­lies who live close by, and that the “re­sound­ing take­away” was that the peo­ple who live around the plant are “quite rea­son­able and are just look­ing for trans­parency from the op­er­a­tor”.

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