In January 2016, Rockhopper were delighted to announce that the Sea Lion Phase 1 development project had entered the Front End Engineering and Design (“FEED”) stage with a set of world-class contractors.
The Sea Lion Phase 1 development definition phase was completed in late 2015 and significant improvements have been identified to enhance overall project economics in response to the lower oil price environment.
Highlights of the Phase 1 development
- Recoverable resources to be commercialised increased from 160 mmbbls to approximately 220 mmbbls (operator’s estimate).
- Field peak production of approximately 80,000 bbls per day.
- Field life increased from 15 to 20 years.
- Despite the increase in scope, the estimate of pre-first oil capex requirement is now US$1.5 billion (August 2016), equivalent to approximately US$7 per barrel. Further cost reductions are expected given the current market environment.
- Significant improvement in project economics for both partners resulting in a materially lower break-even oil price for the project which is now estimated at US$45 per bbl.
FEED on Sea Lion substantially complete, focus shifting to commercial, regulatory and financing solutions
Front End Engineering and Design (“FEED”) for the Sea Lion Phase 1 project was largely completed in 2016. Through
optimising the facility design and installation methodology, as well as on‐going market engagement with the supply chain
contractors, estimated capex to first oil reduced from US$1.8 billion to US$1.5 billion. As a result, life‐of‐field costs (capex,
opex and FPSO lease) have reduced to US$35 per bbl.
Tender packages for drilling, well services and logistic services have been prepared and issued with proposals received and
evaluated. As part of the tendering process, indicative proposals have also been received for the provision of financing
from potential contractors to the project. Further work will be required to mature these indicative proposals to binding
offers of funding.
Earlier this year, Portland Advisers, a specialist export credit agency project finance adviser was appointed by the Sea Lion
joint venture to support the financing process for the project. Discussions have been initiated with UK Export Finance, the
UK’s export credit agency, in relation to a proposed US$800 million senior debt financing for the Sea Lion project.
In parallel, discussions are progressing with the Falkland Islands Government (“FIG”) on a range of fiscal, environmental
and regulatory matters. Extensive dialogue with FIG has ensured that both the Field Development Plan and Environmental
Impact Statement are well progressed and expected to be legislatively compliant when they are formally submitted later
this year. Engagement with FIG continues with a view to obtaining the consents and agreements necessary to sanction the
project in 2018.