The projected cost of developing the first phase of the Sea Lion field in the frontier North Falklands Basin is forecast at more than US $5 billion, according to operator Premier Oil.

The expected total Capital Expenditure (Capex) figure of precisely $5.2 billion to get to first oil was revealed by the operator and its partner Rockhopper Exploration, but the hefty price tag appears not to faze them.

Having opted last month (see DI, 27 January 2014, page 1) to develop the field via a Tension Leg Platform (TLP), Premier has already gone on to confirm that it also has a separate TLP facility in mind for a potential second phase of development. Sea Lion itself is located in a water depth of 450 m (1,476 ft) in the harsh environment South Atlantic, offshore the Falkland Islands.

Up to $3.5 billion is budgeted for the surface facilities at Sea Lion, with the TLP accounting for $2.4 billion of that. Subsea equipment and risers account for $450 million, while project management and other costs are put at $650 million. Another $1.7 billion is estimated for development drilling.

Capex to first oil is put at $3.8 billion, while annual operating expenditure is likely to be in the region of $280 million a year, Rockhopper and Premier have indicated.

Project sanction is anticipated in the second quarter of 2015 with first oil pencilled in for between three and a half or four years later – mean 2019 is now the more likely onstream date, slightly later than originally envisaged.

The first phase development will involve the TLP facility, a Floating Storage and Offloading (FSO) unit and an offtake tanker. Up to 32 wells will be required – 19 producers, 11 water injectors and two subsea gas injectors, in order to recover an estimated 293 MMbbl over 25 years. Peak annual production is forecast at up to 125,000 b/d – suggesting an average of about 6,500 b/d per production well. Water injection will be used from the start of production.

The potential second phase of development – still obviously very much subject to further appraisal work and production performance from the first phase – will take in other discoveries, including Casper, Casper South and Sea Lion South, via a single manifold tied back to the TLP. But further exploration drilling could change this, Premier has indicated, saying that the operator could “…change the scheme to a second TLP”.

Neil Hawkings, Premier’s director in the Falklands Islands, did also further clarify why Premier preferred a TLP over the originally favoured FPSO solution: “Crucially it does not move up and down with the wave action,” he said simply.
Speaking at a capital markets day presentation, he continued: “What that means is you can have the wellheads up on the surface above the water line. It [the TLP] moves a little bit from side to side but that can be taken care of. But crucially it allows you to have the wellheads up on the surface where you can access them at any time that you want, and you can put on to that platform a permanent drilling rig. It also then allows you to do away with the vast majority of your subsea infrastructure and in particular any oil flow lines for flowing fluids back to the central structure. We will still have a couple of gas injection wells but that is relatively straight forward compared to flowing crude through the subsea systems.”

Hawkings underlined what Premier sees as a TLP’s big advantage, which is the option to put a permanent drilling rig on the platform, providing access to the wells and negating the need for a mobile rig that would be required for an FPSO any time well workovers are needed.

In hard cash terms Premier also said the TLP choice allowed a $500 million saving on the project cost.
Project execution has so far involved feasibility studies carried out by FloaTEC and HOE – Houston Offshore Engineering. This work has been taken forward into conceptual engineering by HOE, supported by other contractors: Jacobs Engineering has worked on process design and KCA Deutag’s RDS worked on rig equipment. Atkins in the UK provided input on HSE-related issues.

FEED contracts are scheduled to be rolled out in the second quarter, and a short-list of EPC bidders is timetabled for the fourth quarter. By this point Premier aims to finalise project finance, and – crucially – secure a new farm-in partner to help reduce its financial exposure. Premier plans to submit a draft Field Development Plan for approval to the Falkland Islands Government for approval by the end of this year.

EPC tenders are due out in Q1 2015, and project sanction is anticipated by Q2 2015.

The next stage will be a project design phase with a TLP FEED process for the hull, topsides and drilling facilities. Premier will begin an FSO design competition concurrently, as well as FEED work on the SURF facilities.

This will be followed by main EPC contracts for the TLP hull, topsides, drilling facilities, and detailed design of the TLP, while FSO supply and SURF supply contracts will be progressed at the same time, leading to a SURF EPCI.
Hawkings suggested several locations for fabrication of the TLP hull – in Korea, China, Singapore or Japan. Topsides fabrication could also take place in any one of the US, Korea, Dubai or Singapore, with topsides integration possibly to be done in the US. Once complete, the TLP is likely to be dry-towed to the Falklands.

Sea Lion was originally discovered in 2010 with the 14/10-2 well, and was subsequently appraised in 2011 and 2012 with nine further wells in PL032 in the North Falklands Basin. The licence is operated by Premier with 60%, with partner Rockhopper holding 40%. PL004 contains the Casper, Casper South and Beverley discoveries. Casper was drilled with the 14/10-8 well.

Overall the accumulations are estimated to contain 1.2-1.4 Bbbl of oil in place. This figure varies depending on whether there is a gas cap to the west of Sea Lion. If not gas, it could represent another 60 MMbbl of oil upside.

Further Falklands exploration is planned with four wells in 2015, on the Sea Lion West Flank and the Chatham prospect;, on Zebedee in PL004b which overlies Sea Lion, Jayne East in PL0004c, and Isobel and Elaine, in PL004a. Evaluation of rig tenders for this drilling programme is also currently underway.

Offshore