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Hopefully the board have some friends in the renewable energy sector that will speak positively about barryroe and its environmentally friendly plans to extract oil and gas from Barryroe, whilst also taking the time to mention that Providence is not included in the current ban on oil and gas exploration offshore Ireland, and any rowing back on that position sends the wrong signal to all companies wishing to invest in the energy sector in Ireland.
Kinsale Energy Ltd is a wholly owned subsidiary of Petronas so I presume Petronas will pick up the pieces if there were a default as they make billions from both oil exploration and petrol distribution.
In fact, I was surprised that Petronas did not join the Barryroe coalition and, in the past, it was rumoured that Petronas actually contemplated a bid for Providence. Could still be on the cards, especially now that the coalition seems to be in place and would certainly mitigate the need for decommissioning of Kinsale.
Although I’m not sure I’m 100% up to date, as it changes so often, I believe in the UKCS that the govt has done everything to avoid having to pick up any decom liability.
So (if Kinsale was in the UKCS) and KSE went totally bust and had no decom fund then the govt would look back at the history of who did what - as you indicate.
Some previous licence holders / operators could also be bust or out of business so it would be pointless putting the monkey on them. But Marathon is still liquid and could be forced to take it on. I believe that worse that that the govt could go back to the original drilling contractor / service companies if all else failed.
I need to get into the Irish regs but not a fan of trying to understand that sort of thing particularly.
In law "recouped" means "deduct or keep back (part of a sum due)" and since the money for the decommissioning is "kept back" and "deducted" over the life of the field to pay for the decommissioning I don't know if there is an alternative word. "Retained" if you like.
However, I came across an interesting statement which, if correct, could put the Irish government in the firing line for the decommissioning costs of Kinsale.
It said "In offshore oil and gas, the government is ultimately liable to decommission assets that the operating companies cannot afford to decommission themselves. There is some protection given by the fact that partner operators and previous owners of assets are liable before it falls to the government."
So what if KSE just walks away and leaves have the infrastructure in place? Will the Greens pay for the rest or will any law that they or the People Before Profit bring in to ban exploration for gas and oil end up being kyboshed by another Money Message? And given the parlous state of the Irish economy post Corvid 19 and Apple debacle where are they going to find the money?
No wonder this deal with the consortium is taking longer than we expected. It is far more complex than anybody has imagined and get it wrong would cause major long term consequences for the government and the country.
I don't think ‘recouped’ is really the correct expression.
There’s an obligation on the Operator to set aside a sum of money on the balance sheet equal to the costs of decommissioning at the end of field life. So, as you say, the cash is in the kitty but this has been ‘saved’ over many years. It’s a bunch of cash.
Although I personally doubt that Providence has any interest in the platforms if they were stupid enough to take them over the decommissioning responsibility, cost wise, has still to be accounted for and the decommissioning fund may move to the new operator or remain where it was. Loads of examples of this in the North Sea.
I really don’t understand why Providence would want the platforms along with the residual decommissioning responsibility. It’s a horrendous piece of work that needs an army of people to manage.
Since Petronas has no use for Kinsale et al. and the decommissioning agreement has been made with DCCAE they must obviously know how much it is going to cost them to decommission. The process with decommissioning oil and gas wells is that the cost of decommissioning is recouped before you decommission so technically Petronas have already got the money for the decommissioning in the kitty so, if they are going to leave the infrastructure in place they will save a fortune which I presume they will pass on to Providence if a deal can be reached..
It is a bit like an IBNR in Insurance where Insurance companies can withhold capital sums against potentially future claims.
On that basis, Petronas and PSE should just transfer the whole lot to Providence for a substantial sum of money they have already retained because Barryroe will have to do the decommissioning which they will have to pay for when Barryroe is exhausted.
Check Slide 37 in the AGM presentation and you will see that Linn has included much of the Petronas infrastructure in what he envisages the Barryroe solution to be.
So, it will be interesting to see what sort of a deal Linn pulls off.
For example, how long did it take Brid Smith to get her vote? She started in 2016 and in the end she got clobbered on a technicality of "Money Message". So what will happen this time? If it takes any thing as long as that we will have a new government long before that.
Furthermore, it will be how Linn puts his case. If he does the Frank Carson "It's the way I tell them" you could confuse this crowd of zombies till the cows come home.
So, I don't see anything to stand in the way of Linn and the members of the consortium. All we need now is to see how they are going to fund the development. I presume when the group is signed in their credibility will be the basis on which the money is borrowed.
After all, look at Tullow. How much did they borrow and how much do they still owe? In 2017 they had debts of $5.15billion. They are still "stuffed" with debt as they use revenue to defray it but how much would Providence, backed by the consortium, need to borrow? Sequa reckoned only $300m and that was when development costs were high. I reckon you could do it for $200m which, is peanuts in this day and age and you could certainly do it on a rolling basis of say $50m up front.