Rockhopper Exploration expects that the final investment decision for the $1.5 billion Sea Lion field development will be made by the end of 2018. The field located offshore the Falkland Islands was discovered in 2010 and is operated by Premier Oil.
The partners are now working on moving forward the commercial, fiscal and financing elements required to secure the $1.5 billion of capex required to achieve first oil.
“The project continues to move towards sanction at the end of this year…,” Rockhopper said on Thursday.
Rockhopper has said that Letters of Intent have been entered into with contractors for the provision of well services and certain logistical services; as well as for vendor financing for the Sea Lion Phase 1 development.
Under the terms of the LOIs, an exclusivity period has been granted to each contractor during which the joint venture will negotiate binding documentation based on agreed principles for the provision of both services and vendor financing.
“During Q1 2018, the joint venture expects to enter further agreements related to drilling and the subsea system, again covering both the provision of services and the balance of the targeted vendor financing,” Rockhopper said on Thursday.
To remind, FEED on Sea Lion phase 1 was completed during 2016. As part of this, Premier worked with its four main contractors – SBM Offshore for the FPSO, Subsea 7 for the subsea installation, NOV for the flexible flowlines and One Subsea for the subsea production system – and optimized the facilities design and installation methodology of the development.
As a result, Premier reduced its estimate for gross capex to first oil from $1.8bn to $1.5bn. The company saw the breakeven cost of the project lowered from $55/bbl to less than $45/bbl. The final investment decision (FID) was previously planned for mid-2017.
Sanction in 2018
Furthermore, the joint venture expects to start a bank engagement process with the aim of establishing bank market appetite for the project. In order to support this, the process to select certain lender due diligence advisers (particularly in relation to subsurface and environmental matters), has begun.
According to Rockhopper, the partnership has been in talks with the Falkland Islands Government over a range of fiscal, environmental and regulatory matters.
A new draft Field Development Plan was submitted for discussion with FIG in November 2017 and the government has recently confirmed it does not anticipate that the planned discussions will uncover any major issues and that the minor issues under discussion should be satisfactorily resolved in due course, Rockhopper said.
A 42-day public consultation on the Environmental Impact Statement is expected to start in January 2018.
“Engagement with FIG continues with a view to obtaining the consents and agreements necessary to sanction the project in 2018,” Rockhopper said.