Rockhopper Exploration has welcomed an uptick in resource estimates off the Falkland Islands and aims to sanction the Sea Lion development this year.
New estimates prepared on behalf of operator Navitas Petroleum have upped resources at the North Falklands Basin (NFB) by over 10%, with gross 2C resources increased from 712 million barrels to 791 million barrels.
Discovered by Rockhopper (LON:RKH) in 2010, the basin’s main target – Sea Lion – lies around 137 miles north of the Falkland Islands. Having languished for several years, new momentum was injected into the project following Navitas’ acquisition of stakes held by Harbour Energy in 2022.
The move upped Navitas’ holding to 65% of the project, with the remaining 35% share retained by Rockhopper.
The partners floated a new development plan for the field in March 2023 with a “staged approach” which they said would result in material reductions to capital and operating costs, while still achieving the same production rate plateau.
Up to 3 FPSOs required
Rockhopper reported this week that Navitas has now identified “suitable and available” floating production storage and offloading (FPSO) vessels for the development, and is actively working with vendors to secure all long lead equipment.
Work continues towards a targeted phase 1 final investment decision (FID) in 2024, ahead of first oil at the end of 2026.
The company says its proposed field development plan (FDP) – involving 23 wells, 11 of which would be drilled in Phase 1 – has now been optimised to the FPSO specifications, with plans to reach a peak production rate of up to 55,000 barrels per day over an eight-year period.
The upgrade of NFB estimates also brings a 16% increase in resources at Sea Lion, which have been upped from 269 million bbls to 312 million bbls.
While a vessel has not yet been named, Rockhopper says the unit has a disconnectable turret which would enable redeployment to another field off the Falklands, and allowing “a second, potentially larger vessel” to replace it at Sea Lion, enabling increased production capacity above 80,000 bpd.
The long-term potential for the basin could utilise up to three FPSOs with a total production of approximately 200,000 bpd, it said.
An updated FDP has been submitted to the Falkland Islands Government and it is anticipated that an updated environmental impact assessment will be submitted during Q1 2024, the firm added.
Total capex for the scheme was put at $2.5 billion, of which pre-first oil commitments would total about $1.2bn.
Rockhopper notes that capex estimates have been brought down to approximately $8 per barrel and life-of-field opex “materially reduced” to under $17 per barrel.
Italy arbitration continues
Part of the work to progress Sea Lion will be funded by a new deal with a specialist legal fund which has allowed the company to monetise its ongoing legal suit against the Italian government.
Rockhopper stands to secure a significant award following a judgement on the Ombrina Mare field off Italy, for which Rockhopper failed to clinch a final concession when the country reinstated a near-shore exploration ban in 2015.
However, an 18-24 month bid by the state to annul the judgement has further delayed any payout. A hearing on the annulment is currently scheduled to commence in April 2024.
Rockhopper said proceeds from the monetisation – worth tens of millions of euros – will be used for working capital, general corporate purposes and towards its equity funding requirements for Sea Lion.
As of December 2023, the specialist fund will also cover all costs related to the arbitration.
This week the firm said it was continuing to work through the requisite approvals and still expects completion of the case by no later than 30 June 2024.