Falkland Islands government facing struggle to sustain Sea Lion project

Harbour Energy’s recent announcement of its planned withdrawal from the US$1.8-billion Sea Lion oil project in the offshore North Falkland basin is symptomatic of recent developments in the E&P sector, according to GlobalData.

Many E&P companies are reassessing their portfolios following the market downturn last year, the consultant claimed.

Effuah Alleyne, senior upstream oil & gas analyst, said: “Add in political pressure and environmental considerations, and you get the situation faced by the Falklands.

“The Falklands Islands government (FIG) had completely committed to the oil sector, but its efforts have unfortunately come at a time where E&P company investment strategies are focusing on low-risk, high-margin and capital-efficient projects.

“With the industry trending towards energy transition and low-carbon projects, it will be challenging for new remote oil markets.”

Harbour Energy was formed in March via an all-share merger between Sea Lion operator Premier Oil and Chrysaor Holdings. Phase 1 of the development, with a breakeven oil price of US$39.50/bbl, had been projected to come onstream in 2025.

Ms Alleyne continued: “Harbour Energy’s potential exit of Sea Lion can cause further delay to the project, which will not be good news for the FIG.

“The government continues to show commitment to the project, including extending Harbour Energy’s North Falkland basin petroleum licences to include the Sea Lion discovery area until the 1^st November 2022 with no additional license commitments.”

E&P companies in the Falkland Islands also have to take into account pressure from Argentina’s government, which claims sovereignty from the UK over the islands.

Source: Offshore Magazine