Premier Oil has downsized its spending on the Sea Lion development in the Falkland Islands.
The project had originally been earmarked for spending more than £3billion.
However in its interim statement, the company said following a project review, the Sea Lion would now progress to a “smaller development” with an estimated spending of less than £2billion.
Premier Oil operates the Sea Lion development with Rockhopper off the Falkland Islands.
Tony Durrant, chief executive, said:”Despite external market volatility, 2014 has seen strong operational performance from Premier as we continue to deliver on the key targets communicated to investors earlier in the year.
“Looking forward, new projects will be sanctioned if they are robust at our long term oil price which is currently $85/bbl.
“This includes a phased, lower capex solution for Sea Lion. In 2015, net cash flows will benefit from lower development capital expenditure and a programme of cost reductions.”
In its interim management statement, the company said the decrease in oil prices had caused it to re-examine the scheme.
The statement said: “Premier believes that a smaller initial development of just the north east part of the field, utilising a reduced well count, could be delivered for less than $2 billion of pre-first oil capex (and would be similar in scale to Premier’s existing Catcher field development).
“Initial indications suggest that such a scheme would recover c. 160 mmbbls in 15 years with a plateau rate of 50-60 kbopd.
“The results of the FEED work done to date, along with results from the 2015 exploration programme, will be incorporated into plans for subsequent phases of development.
“Premier, along with the other stakeholders in Sea Lion, are now progressing an initial development of this type.
“Terms have been agreed with Rockhopper, subject to completion of legal documentation, to split the remaining development carry equally between the initial development and the next phase ($337 million to each).
“A project of this size can be funded from existing facilities and cash flows. Although it is no longer a pre-requisite to be able to sanction the project, Premier will continue to seek a partner for the Sea Lion development.”
Premier said the Catcher development – 110 miles east of Aberdeen – was still progressing on track and its finances remain “robust” as the development benefits from a “low cash breakeven”.