Energean reports positive Israeli outlook
Greece’s Energean delivered an optimistic forecast for the company’s Israeli offshore gas assets in a trading update published in mid-January.
The first phase of development was said to be progressing on schedule, the prospects for success in fresh exploration were deemed high, and confidence was expressed over new sales opportunities to absorb excess processing capacity.
The eyes of both existing and aspirant producers are heavily focused on potential domestic and export outlets for additional Israeli gas, ahead of bidding later this year in the country’s second international licensing round.
A trading and operational update from Energean on January 16 pronounced the estimated US$1.6 billion development project at the Karish field – jointly operated with nearby Tanin – to be on track for completion in the first quarter of 2021, producing 4.1 bcm per year of gas.
Two milestones were reached in the fourth quarter of 2018. In November, the first steel was cut on the topsides for the new-build FPSO unit by China’s COSCO – under a subcontract from UK-based engineering, procurement, construction, installation and commissioning contractor TechnipFMC.
In December, a financial agreement was reached with local grid operator Israel Natural Gas Lines (INGL) to fund the onshore and near-shore sections of the 90-km pipeline connecting the production facilities with the domestic distribution system.
The next milestones on the FPSO comprise the start of keel-laying and sailaway to Singapore for topsides integration, and these are due in March and December respectively, Energean said.
Upstream, the upcoming milestone is the planned mobilisation in February of the drillship contracted from the UK’s Stena Drilling to spud a well the following month at Karish North.
The latest update provided fresh detail on the operator’s hopes for the prospect, which is being drilled using one of seven optional wells included in the deal.
The well is directly targeting resources estimated at 36.8 bcm of gas and 16 million barrels of liquids, and Energean estimates the ‘volume-weighted geological chance of success’ at 69%.
The company has said that it believes that success could have a positive read-across to the Karish East prospect – assessed as containing gross prospective resources of 14.2 bcm and 7.5 million barrels of liquids and where the chances of success are put at 70%.
The Stena drillship will then move back to the Karish Main field to drill three wells by the end of the year as part of the original field development plan (FDP) approved by Tel Aviv in summer 2017.
The exploration component of that work would comprise drilling horizons already proven at Israel’s producing Tamar field and at Cyprus’s Aphrodite, and the operator has said that it sees “additional upside beyond that reflected in NSIA [Netherland Sewell & Associates] independent estimates”.
Signals from Energean point strongly to a provisional intent to proceed to a second phase of development – taking in additional resources at Karish and Tanin and five nearby contract areas acquired during Tel Aviv’s first licensing round in 2017.
The latest update noted that 142 bcm and 62 million barrels of gross prospective resources at the undeveloped assets had been identified in the NSIA evaluation, published in August. This put total prospective resources across the operator’s Israeli acreage at 212 bcm.
The FPSO is being built with a capacity of roughly double that due to be produced from the first phase. In early January it signed a landmark sales and purchase agreement (SPA) with local power company IPM Beer Tuvia for deliveries starting in 2024.
This takes its total supply commitments beyond first-phase upstream capacity and Energean has acknowledged the latter deal to be contingent on the results of this year’s drilling programme.
“Energean targets filling the remaining 3.4 bcm per year of FPSO spare capacity in the medium term,” the company said.
The company singled out the ongoing privatisation of the Alon Tavor power station, currently owned by Israel Electric Corp. (IEC), as opening up a potential source of incremental domestic demand and said it was “evaluating export options to key regional markets”.
Energean was rebuffed by the Cypriot authorities last year over plans to build an export pipeline to the island. However, company officials noted when signing the INGL deal that connection of the domestic system to the Karish/Tanin facilities and other future fields would also allow the local network to serve as a vehicle for exports.
Energean’s only existing production comes from Greece’s Prinos field – where a combination of an increase in average output to 4,053 bpd and higher oil prices generated a 56% hike in revenues to US$90.3 million and a year-end net cash position of US$77.3 million.
The company “continues to assess new business opportunities in the Mediterranean region that are aligned with its strategy,” the statement noted.
Israel’s 19-block second bid round, launched in November, focuses on areas close to the coast far from the Greek firm’s existing assets and the terms are designed to prioritise new entrants – with Tel Aviv ever-mindful of the long-term financial benefits of creating a diverse and competitive domestic gas market.