Falkland oil project eyes green light this year as prices rise

It’s eight years since Rockhopper Exploration Plc discovered the 220-MMbbl Sea Lion field off the Falkland Islands. A green light for the project -- which is operated by Premier Oil Plc -- would signal renewed confidence in the outlook for the oil industry after a three-year slump in investments due to low prices.

“The project of course is looking a lot better at $68 a barrel,” Tony Durrant, CEO of Premier Oil, which holds 60% of Sea Lion, said in an interview on Thursday. “It’s a project that’s very sensitive to oil prices.”

Rockhopper, which has the remaining 40%, said in a statement that it’s moving toward giving the go-ahead for the project at the end of this year. Work in the second half of 2017 focused on the “commercial, fiscal and financing elements required to secure the $1.5 billion of capital expenditure.” Preliminary agreements with oil services providers and financial backers are in place for the first phase of development, the companies said.

The partners are making headway regarding the “core financing” of the project which would include banks and export credits, Durrant said. “We might see quite good appetite,” from lenders following the recent rally in oil prices, after they took a “cautious” stance in the past few years, he said.

Last year, Durrant said oil at $55/bbl would deliver a 20% rate of return for Sea Lion. Brent crude, the international benchmark, was trading just below $70 on Thursday, close to a three-year high.