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Falklands oil and gas project in line for ECA funding

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UK oil and gas explorer Rockhopper says it is seeking an US$800mn loan from UK Export Finance (UKEF) for phase one of its Sea Lion project off the Falklands.

The development, where the company has a 40% stake and Premier Oil holds 60%, is due to get the go ahead in 2018 as trade relations between the UK and Argentina improve.

Capex for the first phase is estimated at US$1.5bn.

According to Premier Oil’s CEO, Tony Durrant, US$600mn of the US$800m export financing will come from the UK and the remainder from overseas export credit agencies.

“We’ve got some equipment manufactured in Norway, Denmark, Germany, etc. Their export credit agencies are also involved but they would come into a syndicate led by the UK,” Durrant told the FT in an interview.

UKEF declined to comment on the project as the support has not yet been agreed, says a spokesperson.

The UK and Argentina fought a brief war in 1982, after the Argentine military dictatorship at the time briefly took over the islands, and tensions have escalated again in recent years with the discovery of oil.

In October 2015, an Argentine judge ordered the seizure of assets of oil companies operating in the Falklands Islands, including Premier Oil, Falkland Oil and Gas, Noble Energy, Edison International and Rockhopper. The UK challenged the move but tensions eased after the Argentinian elections which saw opposition candidate Mauricio Macri take office in December 2015.

The project is being developed using a floating production storage and offloading (FPSO) design. Front-end engineering and design (FEED) for the FPSO is being provided by SBM Offshore, while FEED for subsea elements and transport and installation are being carried out by Subsea7, National Oilwell Varco and One Subsea.

A draft field development plan (FDP) has been prepared and submitted to Falkland Islands Government (FIG). If the project sanction decision point is reached in mid-2018 as planned, it would result in first oil during 2021.

Rockhopper CEO Sam Moody comments: “Good progress has been made on a range of commercial, fiscal, regulatory and financing matters associated with the Sea Lion project. The primary focus for the remainder of 2017 will be to further progress funding proposals with the aim of being in a position to sanction the project during 2018.”

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