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Premier Oil and Rockhopper change strategy on Falklands Sea Lion

Premier and Rockhopper to switch from TLP to FPSO

The UK-based junior companies Premier Oil plc (Premier Oil) and Rockhopper Exploration plc (Rockhopper) are changing their strategy to develop the Sea Lion oil and gas project located offshore the Falklands Islands in the contested zone of the South Atlantic Ocean.

Discovered in 1998, the Sea Lion oil and gas field lies by 450 meters of water depth approximately 200 kilometers north of the Falklands Islands in the blocks PL032 and PL033 awarded by the UK Government initially to Rockhopper.

Belonging to the North Falklands Islands Basin, these Blocks PL032 and PL033 as well as the 300 Falklands Islands themselves stand about 500 kilometers away from the Argentina coastline, thus in a disputed area between the two countries.

Premier-Oil_Rockhopper_Sea-Lion-Phase-1_FPSO_FEED_MapTherefore any exploration and production of oil and gas field remains “à la merci” of the good relations between the two countries on this topic.

In addition Sea Lion presents some additional challenges.

With 28 degree API, the Sea Lion crude oil contains a high percentage of wax increasing the complexity and costs of the subsea production system (SPS).

For these reasons, the conclusions of the conceptual studies performed in 2013 were in favor of a solution combining a tension leg platform (TLP) with a floating, storage, offloading (FSO) vessel.

In this scenario, the first phase of Sea Lion exploration and production was estimated to $5.2 billion capital expenditure whereas:

 – Drilling would represent $1.7 billion

 – Production assets would count for $3.5 billion

Premier and Rockhopper to lease Sea Lion FPSO

In 2012, Rockhopper farmed-out Sea Lion shares to Premier so that Premier took the operator role in the development with the respective working interests of:

 – Premier 60% is the operator

 – Rockhopper 40%

Even if the combination TLPFSO appears as the optimum solution for the development of Sea Lion its first ticket at $5 billion for the Phase-1 is pretty high for the tandem Premier – Rockhopper.

For more than one year the two partners have been looking for a major company to take a stake in the joint venture to bring its expertise in complex offshore fields and 

Premier-Oil_Rockhopper_Sea-Lion-Phase-1_FPSO_FEEDfinancing, but the geopolitical environment of the field prevented such help to happen.

Willing to respect deadline for the first oil anyway, Premier and Rockhopper came back the conceptual study to investigate plan B with a conventional floating, production, storage and offloading (FPSO) vessel.

To be leased instead of being purchased, this FPSO concept would match with the Sea Lion Phase-1 development with capital expenditure estimated to$2 billion.

This Sea Lion FPSO should have a production capacity of 50,000 – 60,000 barrels per day (b/d) of crude oil.

For now it is a bit unclear how such FPSO could be leased to be moored in this disputed zone for the same reason as a third partner had hard to join the current tandem.

Anyway in this last scenario Premier and Rockhopper are still targeting to make the final investment decision (FID) on mid 2016 for the first production in 2019.

For more information about oil and gas and petrochemical projects go to Project Smart Explorer

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