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Sable proposed floating storage strategy amid pipeline

dispute

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$450 million estimated needed for vessel purchase or

conversion-sources

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California regulator rules against Sable's pipeline

restart

request

By Shariq Khan

NEW YORK, Oct 24 (Reuters) - Sable Offshore ( SOC )

would need about $1.7 billion in funding to implement a floating

storage strategy it proposed as an alternative to marketing

crude from the Santa Ynez field off California by pipeline, two

sources familiar with the matter told Reuters.

Sable last month told investors that it was pursuing an offshore

storage and treating vessel strategy to market oil produced from

the Santa Ynez project, while it continued contesting California

regulators' challenges to its planned restart of an onshore

pipeline that moved crude from the project to regional

refineries.

The estimated cost of pursuing that strategy has not been

previously reported. Sable's estimates include the refinancing

of a $900 million loan from Exxon Mobil ( XOM ) to buy the

project from the oil major, which shut it in 2015 after an oil

spill, the sources said.

Roughly $450 million in funding would be required for

purchasing or converting the offshore storage and treatment

vessel itself, including any modifications it might need, while

another $300 million would go towards operational expenses

including general and administrative costs, the sources said.

The company has been in talks with the U.S. government for

financing for the project, which could include a federal loan

guarantee, the sources said.

The sources requested anonymity as the estimated financing

requirements and talks with the U.S. government are not public.

Sable declined to comment on the financing estimates or

talks with the federal government. The White House did not

immediately respond to a request for comment.

MONTHS-LONG PIPELINE DISPUTE

Sable has been locked in a months-long dispute with

California over the restart of the Santa Ynez project, which had

been shut for nearly a decade following the 2015 spill. Sable

restarted production from one of the platforms in May.

Last week, a California judge tentatively ruled against

Sable Offshore's ( SOC ) request to lift a cease and desist order by the

California Coastal Commission on repairs it had made to the

onshore pipeline system, called Las Flores.

Sable had said then that the ruling did not affect its plans

to resume petroleum transportation through Las Flores or

production, but added it will appeal the decision.

This week, Sable's plans to restart the pipeline were dealt

another blow after California's Office of State Fire Marshal

said that the company had not met the conditions for the restart

of the pipeline.

Sable has not completed repairs on the pipeline in the way

it was required to under waivers granted to it last year, the

OSFM told Sable in an Oct. 22 letter.

Sable, in its response to the OSFM on Thursday, said the

agency's conclusions are in error and inconsistent with numerous

talks between the two parties.

"Sable strongly disagrees with the allegations, which are

inconsistent with the plain language of the waivers and numerous

past discussions with OSFM experts that confirm Sable is in full

compliance with the waivers. Sable plans to supplement this

initial response and looks forward to quickly resolving this

misunderstanding with OSFM," it said on Thursday.