International independent Premier Oil has said its Falklands Sea Lion development is to be scaled back, initially, to make it a phased development due to rising costs and low oil prices.
Initial costs on an initial, smaller floating production-based development in the north east of the field will be under US$2 billion, said the firm.
Premier, whose initial plan for the field had been to use a floating production, storage and offloading vessel, had announced in July this year that the field would be developed using a tension leg platform (TLP).
Premier Oil said: “Front end engineering and design for the TLP has advanced significantly since the award of the contract in July. However, the new lower oil price environment and our commitment to maintaining a strong financial position has caused Premier to re-examine the scheme with a view to reducing the capex incurred prior to first cash flows from the field.”
The new, initial development will use a leased FPSO, targeting 50,000-60,000b/d gross production plateau, and will commercialize some 160MMbbl over 15 years, said Premier’s partner, Rockhopper Exploration. First oil is targeted for 2019 following sanction in H1 2016.
Crucially, Premier’s scaling back of the project will mean the project can be funded from the firm’s existing cash resources, meaning it will not need a farm-out in order to sanction the project.
Rockhopper said: “The lower cost initial development scheme is designed to target more than 50% of the resources contained within production license 032 and is likely to focus those resources in the north east segment of the field. Initial indications suggest that the concept is likely to consist of 10-15 wells in total.”
Sam Moody, Rockhopper Exploration's CEO commented: "Overall, we are delighted with this revised approach as it materially reduces uncertainty of first-oil from Sea Lion, which we expect to be on production in 2019, as well as very significantly reduces the capex required to reach production.”