/Reuters Agency
Sable Offshore would need approximately $1.7 billion in financing to implement a floating storage strategy it proposed as an alternative to marketing crude from the Santa Ynez field, off the coast of California, United States, via pipeline, two sources familiar with the matter told Reuters.
Last month, Sable informed investors that it was developing an initiative based on offshore storage and treatment vessels to market the oil produced in the Santa Ynez project, while it continues to challenge the California regulators’ questions about its plan to restart an onshore pipeline that transported crude from the project to regional refineries.
The estimated cost of implementing that strategy had not been previously reported. The financing includes the refinancing of a $900 million loan provided by Exxon Mobil to acquire the project from the oil company, which closed it in 2015 after an oil spill, the sources said.
Approximately $450 million in financing would be needed for the purchase or conversion of the offshore storage and treatment vessel, including any modifications it might require, while another $300 million would be allocated for operating expenses, including general and administrative costs, the sources said.
The company has been in talks with the U.S. government to obtain financing for the project, which could include a federal loan guarantee, according to the same sources.
The sources requested anonymity because the estimated financing requirements and the talks with the U.S. government are not public.
Sable declined to comment on the financing estimates or the talks with the federal government. The White House did not immediately respond to a request for comment.
Months-long Dispute
Sable has been embroiled in a multi-month dispute with California over the restart of the Santa Ynez project, which was shut down for nearly a decade following the 2015 oil spill. Sable resumed production from one of the platforms in May.
Last week, a California judge provisionally ruled against Sable Offshore’s request to lift a cease and desist order issued by the California Coastal Commission regarding repairs made to the onshore pipeline system, called Las Flores.
Sable stated at the time that the ruling did not affect its plans to resume oil transportation via Las Flores or production, but added that it would appeal the decision.
This week, Sable’s plans to restart the pipeline suffered another setback after the California State Fire Marshal’s Office (OSFM) stated that the company has not met the necessary conditions to restart the pipeline.
According to a letter sent by the OSFM to Sable on October 22, the company has not completed the pipeline repairs as stipulated in the waivers granted to it last year.
In its response to the OSFM, Sable stated that the agency’s conclusions are erroneous and do not match the numerous conversations held between the two parties.
“Sable vigorously rejects the allegations, which are inconsistent with the clear language of the waivers and with numerous prior discussions with OSFM experts confirming that Sable is in full compliance with the waivers. Sable plans to supplement this initial response and hopes to quickly resolve this misunderstanding with the OSFM,” the company said recently.
