Greece's leading Energean company purchased the Israeli gas reservoirs Karish and Tanin from the Delek Group in a $148 million deal and are aiming not only to develop the Karish and Tanin gas reservoirs, but also to start competition in a previously monopolised sector.
The Greek company plans to build its own production system in the eastern Mediterranean at a cost of up to $1.5 billion to tap two Israeli offshore gas fields, the group's chief executive said on Wednesday.
“We are here to open a market that has been closed until today,” Energean chairman and CEO Mathios Rigas told media at a Tel Aviv press conference on Wednesday.
“For Energean, this is a very important moment,” he said. “I would like to use the word historic from the Greek word 'historia' because it’s a new step in a new country. We have been trying to do business in Israel for a long time and we are going to develop two world class assets.”
After receiving the Israel Petroleum Council’s approval in December, Energean purchased the two gas reservoirs from the Delek Group in a $148 million deal, originally cemented in mid-August. If the company is able to secure sale contracts for at least three billion cubic meters of gas annually, as well as garner government support for expedient regulatory approvals, Rigas expressed his confidence that gas would be able to flow to Israel’s domestic market by 2020.
“These are the two conditions we need – nothing else,” he said. “If we meet these two, gas will be flowing from Karish and Tanin very soon. The reason why we’re here today is because the government of Israel decided that the monopoly situation has to be broken and there has to be competition in the market,” Rigas said.
Located in the north of Israel’s exclusive economic zone, the Karish and Tanin reservoirs jointly contain about 58.7 bcm of gas and 14.3 million barrels of condensate in contingent resources. The company’s capital expenditure until the first flow of gas would reach about $1.3 to 1.5 million, according to Rigas.
In order to finance the project, Energean is seeking out a combination of local and international banks, separating the FPSO lease from the upstream costs, he explained. Rigas expressed confidence that there is sufficient liquidity in the market and that the company would, in fact, be able to raise the necessary funds.
Energean will be submitting its development plan to the government this May, aiming to make a final investment decision by December 2017 and enabling gas flow by 2020, Rigas said. "As long as the company receives the necessary government approvals in a timely manner and secures contracts to supply 3 bcm of gas per year," Rigas said.
“We all have to work together if we want to achieve the objective of breaking this monopoly,” he said. “If everybody sits back and says, ‘I don’t want to take the risk,’ nothing is going to happen.”
Energean has operated oil and gas-producing assets since 1981, and currently holds four licenses in Greece and one in Egypt. In Israel, in addition to developing Karish and Tanin, Energean is considering bidding on new exploration blocks that have recently been made available.
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