* Production vessel purchase instead of lease hikes cost
* Partners still aim to sign-off on project in Dec
* Woodside says will provide cost update before sign-off (Adds Woodside comments)
Oct 30 (Reuters) - Capital costs to develop the SNE oil field off Senegal have risen 40% to $4.2 billion, as the project partners have decided to buy rather than lease a ship for the project, Australia's FAR Ltd FAR.AX said on Wednesday.
FAR, a minority partner, said the project will now buy a floating production, storage and offloading (FPSO) vessel rather than lease one, but as a result, a larger proportion of the total capital cost will be debt-funded.
FAR said the updated plan will help it line up funding for its share of the project, which it expects to announce "in the coming weeks".
Financing has been in limbo amid uncertainty over the development plan and an arbitration in which FAR is challenging operator Woodside Petroleum's WPL.AX acquisition of a 35% stake in the project in 2016. The arbitration is due to be resolved by the end of this year.
Break-even costs for the project are around $33 a barrel for the life of the field and as low as $22 a barrel for initial oil production, FAR said. That compares with the current Brent oil price of about $61 a barrel.
FAR Managing Director Cath Norman said the strong economics of the project mean the value of FAR's share is forecast to triple between now and first oil expected in late 2022.
"This is a terrific result for FAR shareholders, especially given this estimate does not take into account the anticipated upside opportunities," Norman said.
FAR currently owns 15% of the project, although its stake will reduce to 13.67% if the Senegal government exercises an option to increase its stake in the venture.
Woodside Petroleum WPL.AX , operator of the project, confirmed the joint venture is looking to buy a production vessel, but did not confirm the cost estimates FAR outlined. Woodside said it would provide an update on the project's costs and schedule ahead of a final investment decision.
"The joint venture is currently pursuing the purchase of an FPSO as an alternative to the lease option originally contemplated and those negotiations are ongoing," a Woodside spokeswoman said in emailed comments.
The project is aiming to produce up to 100,000 barrels per day in its first phase.