Sable Offshore Is Running a Duel Track
Plan A Pipeline and Plan B FPSO and Federal Funding Either Way, Oil Flows
The process that Sable Offshore has gone through thus far to bring the Santa Ynez Unit (SYU) online is a living embodiment of how awful California is as a state and shows us from the ground level why the state is on the precipice of an energy disaster.
While I have many thoughts on the powers that be, I will keep this piece apolitical and focus solely on the investment merits and the alternative Plan B Sable Offshore proposed in its recent presentation and associated 8K on 9/29/2025.
The bear case against Sable, and the thesis from those that are short the name is essentially that Sable has until January 1, 2026 to bring the pipeline online and if it is incapable of doing so that SB237 and the new regulatory requirements of the state would require Sable to apply for a Coastal Development Permit or CDP, a permit that no matter what Sable does they would never receive.
In that case, the argument is that Sable is a binary, and that should this continue to be delayed further through the end of the year that Sable would be worth $0.00. Even with the case for a takings claim, there is ambiguity on timeline and funding while you litigated the federal takings claim in California court.
Yesterday the case for Sable never being able to produce oil was put to rest as the company rolled out what it is calling Plan B that involves using a Floating Production Storage and Offtake or FPSO vessel to produce the oil wherein oil tankers would then take the oil stored in the FPSO in federal waters offshore Santa Barbra to a refinery.
We think this is a compelling route to first production and that there is a case to be made that this route is actually more desirable in the long term. This Plan B route has been called political cover or a pressure tactic on Newsom and state regulators as an issuance of an ultimatum. This is untrue. Plan B and the FPSO route has been discussed and has been on the table for a long time and while the side effect of 50 years of tanker traffic off the coast of California might very well be enough to force regulators to act in a sensible manor, it is very much a real path forward and if regulators in the state continue to put politics over reason and the energy needs of the state, Plan B will happen. Either way SYU is a federal asset, a federal asset that will have its resources extracted one way or another.
Plan B - The Feds and FPSOs
In the event Sable is unable to bring production online via the onshore pipeline, the company intends to lease an FPSO, moor it in place offshore Santa Barbra and use tankers to take the oil from the FPSO to its destination at a refiner likely ending up in Washington state or China.
Under Plan B first sales would begin in Q4 of 2026 and utilize offtake methods that are permitted and allowable and remain in place from 1981-1994. Under this option the company would obtain expedited permitting support from the federal government and on a per barrel basis would only add $3-$4 a barrel in cost, still making Sable oil one of the cheapest barrels in the United States even with the increase in price - assuming $21 of all in capex for the pipeline per barrel so $25 in the case of the FPSO route.