Navitas Petroleum and Rockhopper Exploration are working to replace two contractors that have pulled out of the Sea Lion project in the Falkland Islands, as the Argentine government intensifies sanctions pressure on companies active in the basin's waters.

The two breaching contractors withdrew after a media report in which one of them stated it will not perform work on Sea Lion and will not participate in oil exploration and production in the Falkland Islands area, the partnership said in an update following a recent speech by Argentine President Javier Milei.

"The partnership updates that it is working to replace two breaching contractors and will continue to make adjustments to the project as required," Navitas said.

Does the contractor exit threaten the schedule?

Navitas, which operates Sea Lion alongside Rockhopper, does not expect any material adverse effect on the project at this stage. The company flagged three conditions under which that assessment could change:

• Delayed or unsuccessful replacement of the two breaching contractors;
• Postponement or failure of the necessary project adjustments;
• Additional contractors withdrawing from Falklands activity without adequate alternatives being found.

The operator also warned that further escalation of Argentine government actions, or additional regulatory and geopolitical changes affecting the legal and commercial assessments of the partnership and its advisors, could produce negative impacts on the project.

What is the sanctioned scope?

The partnership has passed final investment decision and reached financial close. The post-FID funding requirement stands at $1.8 billion through to first oil, with the total requirement to project completion estimated at $2.1 billion.

Phases 1 and 2 of the development will use the FPSO Aoka Mizu, which carries a production capacity of 55,000 barrels of oil per day. Drilling is slated to begin in early 2027, with first oil from Phase 1 scheduled for the first half of 2028.

In August, Navitas signed a memorandum of understanding for a second FPSO, OSX-1, designed to add a further 125,000 barrels of oil per day of production capacity on top of the Aoka Mizu phases.

Who is applying the pressure?

Argentina's campaign to sanction those involved in Falklands oil development continues, the partnership acknowledged. "The government of Argentina is continuing its efforts to impose sanctions on those involved in the Sea Lion project, as well as on other activities in the Falkland Islands," Navitas said.

Despite this, the operator stressed that it is developing the project with the full support of the Falkland Islands government and the British government.

What comes next?

The watch items for Sea Lion are the pace of contractor replacement, the durability of the remaining supply chain as Argentine sanctions filter through vendor boardrooms, and the early-2027 spud date for the Phase 1 drilling campaign. First oil from Aoka Mizu remains slated for H1 2028.