Energean Submits Development Plan for Israeli Fields

Greek E&P firm Energean has submitted the development plan for Karish and Tanin gas fields offshore Israel to the gas and oil supervisor at the energy ministry, it said June 20. "The submission of the programme is another important step towards our greater goal: to create competition in the Israeli natural gas market for the benefit of consumers and for the benefit of the Israeli economy," said CEO Mathios Rigas.

The first phase of the development program includes the drilling of three wells in Karish, construction of a floating facility for gas production, storage and offloading (FPSO), which will be some 90 km from the shore. The facility will have a production capacity of 400mn m³/day. The development will enable Energean to maximise the generation of reserves, reduce environmental impact, process, store and dispose of oil safely, away from the beach, with minimal demand for coastal facilities.

The development Karish reservoir will include the construction of a pipeline to transport the gas from the reservoir to Israel's national natural gas pipeline. The expected investment in the development of the reservoir until the start of production of the gas, planned for 2020, is about $1.3bn-$1.5bn.

The development of Tanin reservoir is planned for subsequent implementation and will include the drilling of six wells to be connected to the FPSO facility.

During the production life of the two assets, they are expected to supply 88bn m³ of natural gas to the Israeli domestic market.

Karish and Tanin are two small gas fields with about 2.7 trillion ft³ of gas between them. Energean bought the rights for the two gas assets from Delek group in an enforced sale for $40mn and will pay another $108mn in 10 annual installments if a positive final investment decision (FID) is taken, expected by year end. Delek will also be entitled to 8% royalties from the gas field. The field's exploration costs were about $150mn.

Last February Kerogen Capital bought 50% of the license off Energean for $50mn that will be invested in preparation for the development of the two fields.

"We will continue to work with the government of Israel to obtain the required approval for the development of the reservoirs as soon as possible, in order to reach a final decision regarding the implementation of the investment (FID) by the end of 2017," Rigas said.

So far Karish and Tanin have secured one customer, a power generation plant that is still to be built. The harder part of the commercial negotiations – getting more customers on board – is expected to be much more difficult, although Energean is offering the gas in a discount of up to 10% and more compared to Tamar's current price to private customers. In the past Energean said it needs annual sales of 3bn m³ in order to take a positive FID.

"Following the gas sales agreements signed with Dalia Energy and Energy Power recently, we are in contact with all existing potential customers who wish to benefit from the competitive conditions we are offering," Rigas said.

Ya'acov Zalel