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Roc has cancelled the order

Roc has cancelled the order
Australian energy firm Roc Oil has terminated a letter of intent it has with BW Offshore for a production ship in order to reduce next year?s capital expenditure.

Australian energy firm Roc Oil has terminated a letter of intent it has with BW Offshore for a production ship in order to reduce next year"s capital expenditure.

Australian energy firm Roc Oil has terminated a letter of intent it has with BW Offshore for a production ship in order to reduce next year"s capital expenditure.

Roc was going to lease a floating production storage and offloading vessel from Bermuda-based BW Offshore for a second phase of development on the Basker, Manta and Gummy oil fields in the Bass Strait off Victoria state.

Roc will review alternative proposals

Roc has cancelled the order and will work with other project partners to review alternative development proposals. They will also consider using another FPSO supplier.

Roc operates the BMG project after its acquisition this year of Anzon Australia. Its partners include Australian firm Beach Petroleum and Japanese companies Cieco Exploration and Sojitz Energy.

BW Offshore said it was preparing to convert the aframax tanker BW Endeavour into an FPSO for the BMG project.

The vessel was scheduled to be installed over the Bass Strait fields in the second quarter of 2010 and would have been able to store 800,000 barrels of oil and produce 40,000 barrels per day.

BW Offshore said it will claw back costs incured on its side of the project from the oil companies. But the project partners are disputing BW Offshore"s claim for cost recovery under the letter of intent.

The first phase of development of the BMG fields involved subsea wells tied back to the small FPSO Crystal Ocean, which is leased from John Fredriksen"s Sea Production.

London-based analysts said costs of the second phase project, which were budgeted at A$1.2bn ($820m), could be reduced if a lower cost FPSO is used.

?In our view it is likely that phase two development will be defered and this is a mixed blessing given the current oil price, which is around $40 per barrel. Roc would have been close to its debit limits at the end of 2009 if it had proceeded as planned,? said analysts at Oriel Securities.

This is the second FPSO lease letter of intent to be cancelled this month and highlights how the floating production market is heading into a downturn in 2009.

Norwegian firm Fred. Olsen Production was forced to scrap upgrade work on the Knock Taggart FPSO after a contract with London-based Bowleven covering the lease of the ship was terminated.

www.TurkishMaritime.com.tr

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