Prinos support package, worth €100m, submitted to Parliament

A financial support plan for upstream company Energean’s Prinos field, south of Kavala, comprised of a state-guaranteed commercial loan of 90.5 million euros for the group’s domestic subsidiary, plus a supplementary loan of 9.5 million euros from the Greek State, has been submitted to Greek Parliament for approval following its endorsement by the European Commission.

The financial support to be offered for Energean’s Prinos field, based on a temporary EU support framework established to offer economic support in response to pandemic-related effects, will be provided by December 31, 2021, used to cover Energean’s investment and working capital needs over 12 months, and will have a maximum duration of 8 years.

The European Commission offered its approval of the support package as it deemed that Energean generates the greatest proportion of its domestic revenues through the sale of crude, acknowledging this activity has been hit hard by plummeting oil prices amid the pandemic, making it difficult for the company to gain access to capital markets.

According to the company’s results for 2020, announced at the end of April, Energean’s Greek subsidiary incurred operating losses of 83.4 million euros in 2020, forcing its parent company to provide it with 62.4 million euros during the year.

According to sources, Energean’s Prinos activity lost 120 million euros over the two-year period covering 2019 and 2020.

Despite improved oil price levels, more recently, the subsidiary’s inability to invest as a result of a lack of financing has led to a further reduction of production, which is expected to lead to losses of approximately 40 million euros this year.

Desfa-Gek Terna, Energean to S. Kavala UGS tender 2nd rnd

DESFA-GEK TERNA and Energean Oil & Gas have advanced to the second-round, binding-offers stage of a tender offering use, development and operation of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala”, while China’s CMEC-MAISON GROUP failed to qualify, privatization fund TAIPED has announced in a statement.

Following the signing of confidentiality agreements, the two qualifiers will be granted access to the tender’s virtual data room, where financial and technical data will be uploaded for due diligence procedures.

However, much work lies ahead before this project matures to enable the submission of binding offers. A number of regulatory issues remain pending, officials monitoring developments have informed, describing the project as complex and highly technical.

Pending issues include determining the percentage of the UGS’s capacity to be regulated for pre-determined earnings, and the percentage of capacity whose earnings will be shaped by market forces. The regulatory period and WACC level also need to be decided and set.

Given these tasks, as well as obstacles raised by the pandemic, binding offers are not expected to be submitted any sooner than late-2021. The final stage of this tender appears most likely to take place early in 2022.

Energean Prinos field support to include State participation

A financial support plan for upstream company Energean’s Prinos field, south of Kavala, just announced by the European Commission, will be comprised of a state-guaranteed commercial loan of 90.5 million euros for the group’s domestic subsidiary, plus a supplementary loan of 9.5 million euros from the Greek State. Greek Parliament still needs to approve the plan.

As part of the plan, the Greek State will appoint a representative to the Board of Directors of the company to monitor the utilization of this financing.

Also, the financial support terms for Energean’s Prinos field, under pressure in recent years as a result of deteriorated market conditions, include a series of key guarantees for the Greek State.

Besides Energean’s bank loan, to be repaid, with interest, to the participating bank, the company’s domestic subsidiary will also need to pay related fees to the Greek State for the latter’s provision of the loan guarantee enabling the company to borrow.

The financial support will be provided until December 31, 2021, will be used to cover Energean’s investment and working capital needs over the next 12 months, and will have a maximum duration of 8 years, according to the terms.

According to Energean sources, activities at the Prinos field in 2019 and 2020 resulted in losses totaling 120 million euros. Despite an improvement in oil prices, a lack of finances for investment has led to a further reduction in output at Prinos, which is expected to lead to a further loss this year, estimated at 40 million euros.

The financing support plan will ensure the completion of development at the Epsilon deposit, which Energean considers essential to ensure ongoing operations of Prinos, along with the implementation of administrative and organizational restructuring planned by the company with the aim of reducing operating costs and moving ahead with a series of new projects.

Energean upbeat on support prospects for Prinos, 4-year extension granted

Upstream company Energean has received promising feedback from the finance and energy ministries in its effort to secure an EU support package to protect the sustainability of its offshore Prinos field, the country’s only producing unit, in the North Aegean.

The government has relayed that it is cautiously optimistic of a favorable outcome in its support-package application submitted to the European Commission.

Brussels appears to be concluding its exchange with Greek government officials handling the issue and could soon offer its approval, sources informed.

The effort has lasted nearly nine months from the time Greek government officials submitted a support request accompanied by Energean’s Prinos business plan, worth nearly 75 million euros.

The time taken in Brussels has been attributed to this essentially being the EU’s sole case concerning a support request in the hydrocarbon exploration sector.

Meanwhile, EDEY, the Greek Hydrocarbon Management Company, has granted Energean Oil & Gas, a member of the Energean Group, a four-year extension, until March 19, 2025, for exploration activities aiming to identify new fields in the Prinos and South Kavala areas, following a request submitted by the company.

Spain’s Repsol also exiting Ioannina license, to be fully held by Energean

Spain’s Repsol is continuing to disinvest its hydrocarbon interests in the Greek market in the wake of a return to the Greek State of its licensing rights for a block in Etoloakarnania, northwestern Greece, the company’s latest move being a plan to withdraw from a license concerning a block in Ioannina, also in the northwest.

Repsol, which formed a partnership with Energean Oil & Gas for the Ioannina block, holds a 60 percent stake in this project, now at a pre-drilling stage, as an exploratory step.

Repsol has informed EDEY, the Greek Hydrocarbon Management Company, of its decision to withdraw from the Ioannina block, according to sources. The Spanish petroleum firm’s 60 percent stake will be transferred to Greek partner Energean, currently holder of the license’s other 40 percent, the sources added.

The Spanish company’s decisions on Greece are part of a wider disinvestment strategy aiming to reduce the firm’s international exposure to hydrocarbon exploration and production activities, sources explained.

Energean will seek a deadline extension, from EDEY, for drilling at the Ioannina license as it intends to find a new partner, sources informed. The Greek company remains interested in exploring the area’s hydrocarbon potential, the sources added.

Repsol’s intentions concerning an offshore block in the Ionian Sea, for which it has formed a 50-50 joint venture with Hellenic Petroleum, remain unclear.

New deadline extensions granted for work at hydrocarbon blocks

The higher risk entailed in hydrocarbon exploration as a result of the coronavirus pandemic and a mass turn, including by petroleum companies, to green-energy activities are factors forcing investors with licenses to Greek blocks to delay their development plans.

Energean Oil & Gas and Hellenic Petroleum (ELPE) have both requested and been granted deadline extensions for preliminary exploration work at two blocks to which they hold licenses that were approved by Greek authorities in 2017 and 2018, respectively.

These extensions concern offshore Block 2 in the Ionian Sea – for which Energean is the operator with a 75 percent stake following Total’s withdrawal in February, 2020, and ELPE the minority partner with a 25 percent stake – and an onshore block in the northwest Peloponnese for which ELPE is the sole participant.

Energean requested and was granted a 24-month extension, until March 15, 2023, by EDEY, the Greek Hydrocarbon Management Company, for preliminary work at Block 2 in the Ionian Sea.

EDEY also granted ELPE an extension, though shorter – 6 months, to September 15, 2021 – for the completion of preliminary work at its northwest Peloponnese license. ELPE originally sought a 20-month extension until March 15, 2022.

These extensions follow a decision, early this year, by Repsol and Energean to return to the Greek State their license to an onshore block at Etoloakarnania, northwestern Greece.

Also earlier this year, EDEY granted a third extension to ELPE and Edison E&P (now Energean, following its acquisition of the Italian company’s local hydrocarbon portfolio) for initial drilling at a Gulf of Patras block in the country’s west, which has been extended to January, 2023.

South Kavala UGS qualifiers in March, plenty of work needed

Privatization fund TAIPED is expected to have completed its appraisal of first-round bids in a tender offering development and operation of an underground gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece next month, possibly within the first half of March, energypress sources have informed.

The fund, at that point, will be ready to announce its list of second-round qualifiers.

TAIPED and the government are taking cautious steps for this project, regarded as complex, especially on matters concerning the tender’s binding-offers stage, sources informed.

Three bidding teams have submitted non-binding expressions of interest for the first round. These are: China Machinery Engineering Co. Ltd. (CMEC) – Maison Group; DESFA – GEK Terna; and Energean Oil & Gas (in alphabetical order).

Much work appears to still lie ahead for this privatization, whose completion is not expected any sooner than next autumn, sources noted.

Pending matters include the delivery of a finalized operating framework for the South Kavala UGS by RAE, the Regulatory Authority for Energy.

This framework will determine the pricing system for the UGS, or the proportion of the facility’s earnings to be regulated and the proportion to be shaped through competitive procedures.

Besides RAE’s operating framework, bidders will also need to conduct due diligence before submitting second-round offers.

 

 

Repsol-Energean abandon rights for Etoloakarnania block

A consortium comprised of Spanish petroleum group Repsol and Energean Oil & Gas has surrendered its hydrocarbon exploitation and production rights for on onshore license in the Etoloakarnania area, northwestern Greece, the partners informed EDEY, the Greek Hydrocarbon Management Company, last Friday, sources have revealed.

The partners attributed this decision to the sharp drop in oil prices that has made upstream investments unfeasible, as well as their environmental footprint efforts.

Repsol is also preparing to withdraw its interests from an offshore block in the Ionian Sea through a license it shares with Hellenic Petroleum (ELPE).

In addition, the Spanish group is reconsidering its interests in a license for an onshore block in Ioaninna, also in Greece’s northwest, sources informed. Repsol holds a 60 percent stake in this license, the other 40 percent belonging to Energean Oil & Gas. The partners face an April deadline for an investment decision concerning initial drilling.

Three months earlier, Repsol, through a strategic business plan covering 2021 to 2025, announced exploration and production investment cuts worth 700 million dollars, annually. The company plans to focus its activities in 14 countries, not including Greece.

Prinos field threatened by poor results, decline projection

Operations at the Prinos field, Greece’s only producing oil field, in the country’s offshore north, are in great danger of being disrupted following poor production figures in 2020 and a further decline predicted for 2021, a wider company update just delivered by Energean Oil & Gas, the field’s license holder, has suggested.

In 2020, production at the oil field reached just 1,800 barrels per day, while its inferior-quality output was sold at a discount price, between 7 to 8 dollars below Brent levels.

This level of output represents less than 4 percent of Energean’s overall production, which, last year, reached 48,000 barrels – mostly natural gas.

Output at the Prinos field is projected to drop below 1,500 bpd in 2021 as, even if a rescue plan for the facility is approved, related investments needed at the facility will take time to complete.

The rescue plan, announced last June by Energean and dubbed Green Prinos, envisions an adjustment for eco-friendly operations through a series of investments worth 75 million euros.

Energean’s administration, in its company update to analysts, expressed hope that a solution can be found in the first quarter of 2021 for its rescue plan, submitted to the Greek government, which then forwarded the plan to the European Commission.

The rescue plan has remained stuck at the European Directorate for Competition, whose approval is required.

Energean is considering the development of a carbon capture and storage project at its Prinos field, which would be the first in Greece, promising new life for the project, along with the support of investments at field E, whose development depends on the outcome of a financing bid, company officials informed.

Overall, the news for the Prinos field is not good. Losses incurred by this unit since September, 2019, when its crisis began before being further aggravated by the pandemic, have exceeded 100 million euros.

This loss, however, has not affected the overall financial results of Energean, generating significant earnings in Egypt, primarily. Israel, too, could become a major source of earnings for the company as of next year.

Energean plc takes Final Investment Decision on Karish North development

Energean plc has taken Final Investment Decision (FID) on the Karish North gas development, offshore Israel, 21-months after the announcement of the discovery, the company has announced in a statement.

In November 2020, DeGolyer and MacNaughton issued an independent Competent Persons Report that, inter alia, certified 2P reserves of 32 Bcm of gas plus 34 million barrels of liquids
(approximately 241 million barrels of oil equivalent in aggregate) in Karish North as at 30 June 2020.

The discovery will be commercialised via a low-cost tie-back to the Energean Power FPSO, which will be just 5.4km away.

Production from the first well at Karish North is expected to be up
to 300 mmscf/d (approximately 3 Bcm/yr) and first production is expected during 2H 2023.

Initial capital expenditure in the project is expected to be approximately $150 million, or $0.6/boe; and Energean estimates that the project will deliver IRRs in excess of 40%.

On 13 January 2020, Energean signed an 18-month, $700 million term loan facility agreement with J.P. Morgan AG and Morgan Stanley Senior Funding, Inc., the primary uses of
which will be:

• Accelerating the development of Karish North, enabling the capital expenditure on the project to be undertaken in advance of first gas from Karish Main. Following first gas from Karish North, the overall Karish project well stock will be able to produce well in excess of
the full 8 Bcm/yr capacity of the FPSO, retaining operational redundancy in the well stock therefore further enhancing overall project reliability.

• Funding the $175 million up-front consideration for the acquisition of the minority interest in Energean Israel Limited, as announced on 30 December 2020, which becomes payable on transaction close, expected 1Q 2021. Energean views the acquisition, for between $380 million and $405 million in total, as highly value-accretive, with very attractive transaction metrics.

Additional uses of the loan are:

• Funding approximately $100 million of capital expenditure required to install the second oil train and second riser on the Energean Power FPSO, which will increase the Energean Power FPSO liquids production capacity to approximately 40 kbopd ( from 21 kbopd) and allow maximum gas production of 800 mmscf/d (approximately 8 Bcm/yr, from 6.5 Bcm/yr). Both the oil train and the second riser are expected to become operational during 2022.

• The 2022 offshore Israel exploration and appraisal drilling programme in early 2022, with up to five wells including:

  • Appraisal of the potential oil rim that was identified as part of the Karish development drilling campaign plus exploration of further prospective gas and liquids volumes within the Karish lease.
  • Block 12, which is located between the Karish and Tanin leases, and is estimated to contain gross prospective recoverable resources in excess of 108 Bcm (3.8 Tcf)
    according to the D&M CPR, with the primary targets having geological chances of success ranging between 63% and 79%. The first well is expected to target the 20
    Bcm (0.7 Tcf) Athena prospect, for which the primary target (11 Bcm /0.4 Tcf) has a 70% geological chance of success. Success at Athena would significantly de-risk
    the remaining 88 Bcm (3.1 Tcf) of prospective resources in the block. Any discovery in that block would be prioritised over the development of Tanin due to (i) lower capital expenditure investment (as compared to Tanin) and (ii) the absence of any seller royalties, unlike the Karish and Tanin leases as Block 12 was not part of the original Karish-Tanin acquisition.
  • Additional prospects assessed to contain 102 Bcm (3.6 Tcf) of gross recoverable prospective resources, based on management estimates, in Energean Israel’s remaining exploration blocks.
    • Whilst total pre-production capex guidance for the Karish Main project remains at $1.7 billion plus the $140 million of deferred payments to TechnipFMC, the balance of the Loan will provide further financial flexibility for Energean Israel Limited.
    The Loan will only be drawn to the extent necessitated and drawn amounts will attract a margin of 5.75%, which steps up by 0.25% every three months, with a maximum of 7.00%. The Loan has been sized to cover the cost of associated fees and interest. Energean maintains its target to retain its medium-term net debt / EBITDAX ratio below 2.0x                                                                                                                                                    On 13 January 2021, Energean also agreed with the existing lenders of its $1.45 billion project finance facility to extend the maturity by nine months, from December 2021 to September 2022.
    Combined with the above Loan, the extension to the maturity date of the project finance facility provides Energean the necessary time and flexibility to optimise its long-term capital structure.
    This is expected to take place in 2021, depending on market conditions.                                                                                                                                                                                                    Mathios Rigas, CEO of Energean, commented: “I am delighted that we have taken Final Investment on Karish North, proving the value of the Energean Power FPSO as a quick and low-cost commercialisation route for our assets in Israel.
    We are also increasing the liquid processing capacity of our FPSO to process the additional volumes we discovered for minimal incremental cost.
    The new term loan and the extension of our project finance facility are a further testament of the confidence of the financial markets in Energean and I want to thank all the institutions for their support. We remain committed to optimising our capital structure to ensure that we maximise total shareholder returns whilst implementing our growth ambitions in Israel and the East Med. We remain on track to achieve our goal of delivering meaningful free cash flows that will support the payment of a sustainable dividend whilst also moving towards our stated target to achieve
    net zero emissions.”

South Kavala UGS tender qualifiers by early February

Greece’s privatization fund TAIPED will finalize its list of second-round qualifiers in a tender offering development and operation of an underground gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece by late January or early February, sources have informed.

Three parties submitted first-round expressions of interest: China Machinery Engineering Co. Ltd. (CMEC) – Maison Group; DESFA – GEK Terna; and Energean Oil & Gas (in alphabetical order).

Assessments of their supporting documents and other criteria are expected to be completed within the next twenty days.

RAE, the Regulatory Authority for Energy, still needs to deliver decisions concerning the operating framework of the UGS.

These pending issues include a RAE decision on the percentage of the UGS project’s capacity to be regulated, thus pre-determining this proportion’s revenue, and the earnings percentage to be determined by market forces.

The authority also needs to decide on the duration of the regulatory period and its WACC level.

Upstream projects awaiting Greek State reassurances

Local and foreign upstream companies holding exploration and production licenses for hydrocarbon reserves on Greek territory, offshore and onshore, are awaiting Greek State reassurances for their ventures following a cabinet reshuffle that has resulted in a change of leadership at the energy ministry, bringing in Kostas Skrekas in place of Costis Hatzidakis.

Oil companies, delaying investment plans as a result of the pandemic and lower oil prices, are waiting for a vote of confidence from the Greek State, market sources insist.

The fall in oil prices, currently at levels of about 50 dollar a barrel, may have halted upstream investments internationally, but, nevertheless, this is a good time for resolving bureaucratic obstacles and preparing local communities for prospective exploration efforts that promise to contribute to job creation and economic recovery.

Four upstream investment plans are currently either at an advanced stage in terms of prospective drilling or at preliminary exploration stages.

Of all four plans, Energean’s license for Katakolo, western Greece, is at the most mature stage. Public consultation on an environmental impact study concerning this project’s drilling requirements was completed in December, 2019. The regional authority for western Greece has offered its approval. Even so, a year later, the energy ministry has yet to deliver its decision on the environmental study.

A license for the Gulf of Patras field, held by Hellenic Petroleum (ELPE) and Edison, is also at a mature stage. The partners requested, and were granted, an extension for the start of drilling at this field. EDEY, the Greek Hydrocarbon Management Company, granted the pair a further 15 months, until January 23, 2023, to facilitate their preparations.

Sources have attributed this additional time to a lack of appropriate regional port facilities, needed to facilitate the installation of equipment required for drilling. ELPE and Edison had previously been given another extension, until October, 2021.

On another front, a partnership comprising Repsol and Energean has until April to start a second stage of exploration activities at its Ioannina block in northwestern Greece. Local community approval is needed. The government needs to take action on the issue.

A fourth upstream project carrying geopolitical weight concerns licenses held by a consortium made up of Total, ExxonMobil and ELPE for offshore fields west and southwest of Crete. Though company representatives recently informed Crete’s regional authorities that seismic surveys are planned to begin towards spring, there have been no further updates or any signs of action.

Energean Israeli exploration to focus on gas deposits estimated at 62 bcm

Energean Oil & Gas will now focus its Israeli exploration activities on the Karish, Tanin and Block 12 fields in an effort to boost its certified natural gas and liquid hydrocarbon reserves.

Following yesterday’s announcements by the Greek company, according to which an independent Competent Persons Report by DeGolyer and MacNaughton certifies 98.2 Bcm (3.5 Tcf) of gas and 99.6 million barrels of liquids (MMbbls) at the Karish, Karish North and Tanin offshore fields of Israel, the exploration program will restart in 2022 for a boost of reserves through the Karish, Tanin and Block 12 licenses. Energean plans to stage its next drilling efforts in two years.

Estimates indicate 62 billion cubic meters of natural gas and 33.4 million barrels of liquid hydrocarbons, representing 431 million barrels of oil equivalent.

Energean will also focus on Block 12 targets – named after the Greek gods Zeus, Hera, Apollo, Athena and Hestia – estimated to carry prospective gas reserves measuring 32.7 billion cubic meters, more than half the overall 62 billion cubic meters.

Discovery of these prospective reserves is expected to further reinforce the Greek company’s standing on the southeast Mediterranean energy map.

Significant 2P reserves increase at Energean’s Israeli Assets

Energean plc has announced the completion of an independent Competent Persons Report by DeGolyer and MacNaughton, which certifies 98.2 Bcm (3.5 Tcf) of gas and 99.6 million barrels of liquids (MMbbls) gross (Energean 70%) 2P reserves in the Karish, Karish North and Tanin fields.

Energean’s gross 2P reserves in Israel now total approximately 729 million barrels of oil equivalent which represents a 44% uplift to previously estimated 2P reserves.

The increase was principally driven by the upgrade of resources following approval of the Karish North Field Development Plan by the Israeli government in August 2020. A Final Investment Decision for Karish North is expected in 4Q 2020.

The CPR also results in a 21.4% (17.5 MMbbls) increase in gross 2P liquid volumes and the field is now expected to average 28 kbpd liquid production over a plateau period of approximately five years. The additional liquids production is expected to have no discernible impact on the scope 1 and scope 2 carbon intensity of the fields, which is expected to remain at approximately 6 kgCO2/boe, (significantly lower than the E&P global average of 18 kgCO2/boe).

Further upside potential is represented by gross risked prospective resources across Energean’s Israeli portfolio of 62.0 Bcm of gas plus 33.4 MMbbls of liquids (approximately 431 MMboe in total). These prospective resource volumes will be targeted by Energean’s next exploration campaign, which is expected to commence in early 2022. All prospects are situated in close proximity to the Energean Power FPSO, representing potential low-cost tie-back options for future developments.                                                                                                                                                                                                      Mathios Rigas, CEO of Energean, commented: “We are delighted that our independent reserves auditor has confirmed 2P gas volumes of 98 Bcm within our Karish, Karish North and Tanin fields, offshore Israel, representing another year of continuous reserves growth in our portfolio. This gas, the majority of which has already been contracted, will be sold under fixed-price gas sales agreements that will protect our revenue stream from commodity price fluctuations, which underpins our strategic goal of paying a sustainable dividend.

The approximately 100 MMboe of 2P liquids reserves and production plateau averaging 28 kbpd over five years, represents a substantial increase on previous estimates, which further supplements our shareholder returns profile with high-margin production that has no incremental impact on our scope 1 and scope 2 CO2 emissions intensity.

We look forward to progressing the 62 Bcm and 33 MMbbls of risked prospective resources across our Karish and Tanin leases and in Block 12, with the intention to recommence our successful exploration programme in early-2022 and, through doing so, will continue to contribute to the diversity and security of natural gas supply into Israel and the wider Eastern Mediterranean.”

 

Three bidders express first-round interest in South Kavala UGS tender

Τhree interested parties have submitted expressions of interest to a tender offering use, development and operation of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece, The Hellenic Republic Asset Development Fund (HRADF S.A.) has announced in a statement.

Expressions of Interest were submitted by the following parties, in alphabetical order:

  • CHINA MACHINERY ENGINEERING CO. LTD. (CMEC) – MAISON GROUP
  • DESFA – GEK TERNA
  • ENERGEAN OIL & GAS

HRADF’s advisors will evaluate the aforementioned expressions of interest and submit to the fund’s Board of Directors their recommendation regarding the candidates that qualify for the next phase of the tender (binding offers phase).

The almost depleted natural gas field “South Kavala” is located in the southwestern part of the Prinos-Kavala basin, in 52 meters of water depth in the North Aegean Sea, about 6 km off the west coast of Thassos.

The duration of the concession agreement will be up to 50 years following the licensing of the UGS in South Kavala. The conversion of the natural gas field “South Kavala” into a UGS will be carried out by the concessionaire within a binding period to be determined in the concession agreement.

The UGS South Kavala is intended to serve as energy infrastructure that will enhance the security of supply in the Greek market as well as in Southeastern Europe, ensuring gas supply to end users and facilitating security-of-supply obligations of power producers and natural gas suppliers.

Storengy’s Kavala UGS tender exit prompts formation changes

A decision by France’s Storengy (Engie) to not participate in a forthcoming tender offering an underground natural gas storage facility (UGS) license for the almost depleted South Kavala offshore natural gas field in the country’s north has prompted a domino effect of formation changes by groups of investors planning to bid.

GEK TERNA appears to have formed an association with gas grid operator DESFA for the tender after having previously agreed to join forces with Energean Oil & Gas and Storengy.

Energean Oil & Gas, holding a license for the virtually depleted South Kavala field, has not remained an onlooker. The company has also found a partner, believed to be domestic, from the construction sector, according to sources.

To date, Energean Oil & Gas has held talks with three major groups, Mytilineos, AVAX and Aktor, the same sources added.

A Chinese investor is also believed to be interested in the South Kavala UGS tender, staged by privatization fund TAIPED, but will not link up with any partners.

The tender is offering rights for the use, development and exploitation of the virtually depleted offshore natural gas field south of Kavala as a UGS facility for a period of up to 50 years.

Participants must submit first-round, non-binding offers by October 19 following three deadline extensions.

South Kavala UGS bidders talk formations as deadline nears

Prospective bidders of an upcoming tender to offer an underground natural gas storage facility (UGS) license for the almost depleted South Kavala offshore natural gas field in the country’s north are deliberating over possible partnerships as the October 19 deadline for official expressions of interest approaches.

Greek gas grid operator DESFA, Energean Oil & Gas and GEK TERNA will participate in the tender, according to enegypress sources, while some market officials believe a Chinese company, not yet revealed, is also interested.

All three Greek companies have remained tight-lipped on possible partnership formations for the tender. GEK TERNA and Energean Oil & Gas are believed to be discussing the prospect of teaming up, while DESFA and the Chinese company will most likely enter the tender alone, energypress sources informed.

The tender, staged by privatization fund TAIPED, will offer rights for the use, development and exploitation of the virtually depleted offshore natural gas field south of Kavala as a UGS facility for a period of up to 50 years.

Investments needed for the project’s development are estimated between 300 and 400 million euros.

The field is located approximately 6 kilometers from the west coast of the island Thasos, in the North Aegean Sea, at a depth of 52 meters.

Its development into a UGS facility promises to contribute to Greece’s energy security and that of southeast Europe.

Repsol given 6-month extension for Ioannina license preliminary work

A pandemic-related extension request made by Spain’s Repsol for an additional six-month period to complete preliminary research concerning a license in Ioannina, northwestern Greece, has been granted by EDEY, Greek Hydrocarbon Management Company, in a decision reached last week that resets the deadline for April 2, 2021.

Repsol, operator of a consortium formed with Energean Oil & Gas for the Ioannina license, had lodged its extension request late in August.

Repsol’s preliminary research work at the Ioannina license was initially expected to be completed by early October ahead of a decision on whether it would proceed with drilling.

The pandemic has severely impacted the upstream industry worldwide. Multinationals engaged in hydrocarbon research and production activities have severely limited their investment plans as a result of the pandemic’s impact on petroleum markets.

A rebound for the upstream sector appears highly unlikely any time soon given the rising second wave of coronavirus cases.

The EDEY extension will enable Repsol to conduct a more thorough analysis of seismic data collected and enable the company to hold on for the prospect of improved upstream industry conditions.

EDEY justified its extension by noting it will help the investors complete their assessment of technical work conducted during the preliminary stage.

 

 

Storengy exits UGS tender, partners seek new operator

France’s Storengy appears to have stepped back from an upcoming tender for the privatization of an underground natural gas storage facility (UGS) at an almost depleted South Kavala offshore natural gas field in the country’s north, energypress understands.

Storengy, a subsidiary of the Engie group, had formed a three-member consortium with Energean Oil & Gas, holder of the South Kavala field’s license, and construction firm GEK-Terna for this tender.

Storengy’s apparent decision to withdraw from the South Kavala tender may be linked to a decision reached two years earlier by Engie for a revision of its international interests and investment plans.

Energean Oil & Gas and GEK-Terna, Storengy’s two partners for the South Kavala tender, remain interested in expressing first-round interest by a September 30 deadline, but to do so, they must find a new partner, a certified gas grid operator, as required by the tender’s regulations.

The two players have subsequently moved closer to gas grid operator DESFA, already eyeing this tender. According to sources, talks between the two sides have commenced. DESFA will need to hold a stake of at least 20 percent in any partnership formed.

Both sides are also believed to be considering other partnership options. Storengy’s withdrawal could also bring in unanticipated European operators.

Investments of approximately 300 to 400 million euros will be needed to develop the South Kavala UGS.

Energean announces key developments for Karish project

Energean plc, the gas producer focused on the Mediterranean, has announced two important developments in the Karish Development Project.

In Singapore, the first topsides module lift on to the Energean Power FPSO (floating production storage and offloading unit)hull has been safely and successfully completed at Sembcorp Marine’s Admiralty Yard, Singapore, the company announced in a statement.

The electrical house (E-house), which contains all the FPSO control equipment and electrical switchgear, was lifted onto the Energean Power hull on August 24. The E-house, weighing in at 850 tonnes, was lifted using the L-801 Barge pontoon crane, with lift preparation commencing early morning and successful touchdown on the hull in the early afternoon.

Sembcorp Marine has been subcontracted by EPC contractor TechnipFMC, while lifting operation has been executed by Jurong Marine Services PTE.

Also, the Energean Power FPSO suction anchors have been successfully installed at the 267 mmboe 2P Karish Field.

In less than 3 weeks, 13 piles of 7.5m diameter, 19m height, and weighing 176 tons each plus one pile of 9m diameter, 17m height, and weighing 233 tons have been installed on the seabed, in water depths ranging from 1,695m to 1,763m.

The piles were transported and installed by the heavy lift construction vessel “Fairprayer”, owned by Jumbo Offshore and subcontracted by the Karish EPC contractor, TechnipFMC.

The operations were performed under Covid-19 social distancing conditions and without any LTIFR incidents.

The “Energean Power” FPSO will be used to develop all of the company’s Israeli fields. It will be installed 90 km offshore and be the first FPSO ever to operate in the Eastern Mediterranean. The FPSO will have a gas treatment capacity of 800 MMscf/day and liquids storage capacity of 800,000 bbls.

Installation of the Energean Power FPSO mooring lines is now in progress and the project remains on track to deliver first gas in 2H 2021.

 

 

 

Two, possibly three, bidders for South Kavala UGS license

An upcoming tender to offer an underground natural gas storage facility (UGS) license for the almost depleted South Kavala offshore natural gas field in the country’s north is expected to attract the interest of two, or possibly three, bidding teams.

Interested parties have been given an extension to express non-binding first-round interest. Prospective participants are busy preparing.

The participation of Storengy – a three-member consortium formed by France’s Engie, Energean Oil & Gas, holder of the South Kavala field’s license, and construction firm GEK-Terna – is considered a certainty as this consortium was established in anticipation of this tender.

Greek gas grid operator DESFA, increasingly active, since its privatization, in various projects, including some beyond its more customary operator-related bounds, is seen as another certain bidder for the South Kavala UGS license.

Senfluga, the consortium of companies that acquired a 66 percent stake of DESFA, appears very interested in the South Kavala UGS tender. This consortium’s current line-up is comprised of: Snam (54%), Enagas (18%), Fluxys (18%) and Copelouzos group member Damco (10%).

Though Senfluga’s three foreign partners – Snam, Enagas and Fluxys – are examining the prospect of joining DESFA to express joint interest, separate bids from the two sides are considered likeliest. The main reason for this has to do with certain tender rules that restrict the ability of consortiums participating in the first round to then reshuffle, if needed.

Pricing policy regulations expected from RAE, the Regulatory Authority for Energy, ahead of binding offers, will be crucial to how the tender plays out as these rules will determine the project’s earnings potential and level of bids.

Prinos field rescue effort now at the finance ministry

A government effort to rescue offshore Prinos, Greece’s only producing field, in the north, is now in the hands of the finance ministry following preceding work at the energy ministry, sources have informed.

The field, like the wider upstream industry, has been impacted by the pandemic and plunge in oil prices.

Deputy finance minister Theodoros Skylakakis is now handling the Prinos rescue case following the transfer of a related file from the energy ministry.

According to the sources, three scenarios are being considered. A financing plan through a loan with Greek State guarantees appears to be the top priority. A second option entails the utilization of an alternate form of state aid. The other consideration involves the Greek State’s equity participation in the Prinos field’s license holder, Energean Oil & Gas.

The European Commission will need to offer its approval to any of these options as they all represent forms of state aid.

Energy ministry sources have avoided offering details but are confident a solution is in the making.

Rescue talks for Prinos, Greece’s only producing field, making progress

Talks between Energean Oil & Gas and officials at the energy and economy ministries for a solution to rescue offshore Prinos, Greece’s only producing field in the north, are making progress, sources have informed.

Heightened Turkish provocations in the Aegean Sea over the past few days – the neighboring country sent a survey vessel into Greece’s EEZ – and greater US presence in the wider southeast Mediterranean region, are two developments that have injected further urgency into the Prinos field rescue talks.

The east Mediterranean is at the core of geopolitical developments that promise to create new political and energy sector conditions.

US oil corporation Chevron, America’s second-biggest energy group, has joined fellow American upstream giant ExxonMobil in the east Mediterranean with a five billion-dollar acquisition of Noble Energy.

This takeover by the California-based buyer adds to the Chevron portfolio the gigantic Leviathan gas field in Israel’s EEZ, as well as the Aphrodite gas field, situated within the Cypriot EEZ and estimated to hold 4.5 trillion cubic feet.

It also offers Chevron prospective roles in the East Med pipeline, to supply Europe via the Leviathan field, and Egypt’s LNG infrastructure, all elevating the petroleum group into a dominant regional player.

Israel and Cyprus recently ratified the East Med agreement, as has Greece, while Italy appears to be examining the prospect.

In another regional development, the Total-ENI-ELPE consortium is preparing to conduct seismic surveys at licenses south and southwest of Crete, and an environmental study southeast of Crete has been approved by Greek authorities. Also, oil majors with interests in Cyprus’ EEZ have planned a series of drilling operations for 2021.

Meanwhile, Turkey, trespassing into both Greek and Cypriot EEZ waters, consistently cites a memorandum recently signed with Libya as support for its actions, as well as its refusal to sign the UN’s International Law of the Sea treaty, strongly disagreeing with an article that gives EEZ and continental shelf rights to island areas.

Greek government officials are well aware that closure of the Prinos field amid such precarious conditions would lead to major consequences, not just economic and social, as would be the case under normal conditions, but also geopolitical.

Ministry still examining Energean Prinos rescue plan

The energy ministry is continuing its close examination of a business plan delivered by Energean Oil & Gas for the rescue of its Prinos offshore oil field in northern Greece, requiring investments totaling 75 million euros in 2020 and 2021 if the venture is to be kept afloat following the negative impact of  lower oil prices and the pandemic, according to the company.

“The ministry is continuing to examine the data provided by the company as well as the business plan. They have determined the size of the necessary funds at 75 million euros but we, too, need to verify this,” an energy ministry official informed.

Early signs of a petroleum market rebound are encouraging but this does not mean that the market has fully recovered, the official added.

The ministry acknowledges the potential damage closure of the oil field would have on the local economy and, as a result, is looking for solutions, the official added.

Energean officials have stressed that time is running out for the oil field’s rescue, urgently needing a solution to remain viable.

The government will need to utilize the EU’s temporary state aid framework to ensure financial support for the Prinos oil field, Greece’s only producing field at present, and its necessary investments.

Energean: Karish pipe laying, subsea systems completed

Energean, the oil and gas producer focused on the Mediterranean, has announced that partner TechnipFMC has successfully completed, on time, the laying of the gas sales pipeline and the main deep-water installations of the subsea production systems for its Karish and Tanin Development project, offshore Israel, describing the step as a key milestone.

Pipelay vessel Solitaire completed the core installation of a 30’’ and 24’’ pipeline of 90.3 km length, at depths of up to 1,700 metres, Energean’s announcement noted. The full pipeline installation, including a significant Tie In Manifold structure (TIM-Water Depth 72m) and the pre-commissioning program, is expected to be completed in 4Q 2020, well within the project schedule, it added.

The pipeline was laid at an average rate, excluding the beach pull, of 4,578 meters per day which represents a world-class performance by TechnipFMC, Energean explained.

The construction support vessel Normand Cutter completed the installation of the production manifold and subsea isolation valve foundations and structures. The Installation of the three sets of risers (2×10” and 1×16”) that will connect the three producing wells to the FPSO and then to the Gas Sales Pipeline is expected to commence in 4Q 2020 and be completed in 1Q 2021, according to the statement.

More than 400 personnel have worked on these offshore operations, during which zero Lost Time Injuries occurred, Energean noted, adding the overall physical progress of the Karish Development project now stands at c. 80% complete.

On behalf of Energean, Vincent Reboul Salze, Project Director – Karish EPCIC, stated: “We are very satisfied with the current installation performance on the subsea scope until now. The East Med in spring has proven to be a favorable environment and the pipelay performance has been remarkable on all aspects.”

Crisis’ impact on Prinos looked at, Energean up against time

The energy ministry has turned to specialized consulting firm assistance for a detailed analysis on the pandemic’s financial impact on the Prinos offshore oil field in northern Greece, the country’s only producing field at present.

The energy ministry’s secretary-general Alexandra Sdoukou, handling the matter on behalf of the ministry, is currently holding talks on a daily basis with officials at Energean Oil & Gas, the field’s license holder.

The company wants emergency government support amid the extraordinary market conditions, energypress sources have informed.

The two sides are believed to be closely examining related data to determine the extent of the financial damage, for this project, due to the plunge in international oil prices, prompted by lower demand amid the widespread lockdown.

Energean Oil & Gas has invested 50 million euros between September, 2019 and May to keep production flowing at Prinos, an aging field, sources noted.

Sustainability is becoming a growing challenge at this venture, employing a workforce of approximately 270 employees, market authorities have noted. A cutdown in operating costs is seen as essential.

A cash injection for “Epsilon”, a fresher field in the area also licensed to Energean, could be made as a support for the company. Another option may entail financial support by the Greek State in exchange for a stake in Energean. Alternatively, state guarantees could be offered for a bank loan.

The finance ministry is also expected to become involved in the Prinos rescue effort. Much work lies ahead before any decisions can be reached. These will require European Commission approval.

Gov’t examining pandemic’s impact on Prinos oil field

The pandemic’s financial impact on offshore Prinos, Greece’s only producing oil field, south of Kavala, is being closely examined by government officials and specialized advisors, energypress sources have informed.

Conclusions have yet to be reached on the extent of the financial damage to the Prinos oil field, licensed to Energean Oil & Gas, but it appears the government will seek financial support for this venture through the European Commission’s Directorate-General for Competition.

Though it is still considered too early for any decisions, the government has apparently already recognized the damage inflicted on Prinos by the pandemic and subsequent drop in demand and oil prices.

The Greek government has pledged production continuity and job protection for Prinos, as was recently highlighted by deputy energy minister Gerassimos Thomas.

Limits have been exhausted to keep Prinos operating, Energean Oil & Gas officials have pointed out, stressing the cost burden on the company.

 

Gov’t committed to Prinos oil field sustainability, deputy tells

The government is committed to supporting the sustainability of the offshore Prinos oil field in the country’s north, Greece’s only producing unit, heavily impacted by the coronavirus pandemic’s effects on the global economy, including record-low oil prices, deputy energy minister Gerasimos Thomas pledged last night in response to questions raised by MPs of the leftist Syriza party and KKE, the Greek Communist Party.

“We are committed to the oil field’s uninterrupted production, an effort through which jobs will be protected,” Thomas stated.

The government is currently negotiating with Energean Oil & Gas, license holder and operator of the offshore field, south of Kavala, for a solid solution, the deputy minister also informed.

A detailed announcement will be made once these talks have been completed and the government has shaped its proposals, the deputy minister told parliament after Syriza MP Soultana Eleftheriadou criticized him for being too vague with his remarks.

Thomas made note of the European Commission’s new framework for state aid as one of the solutions being worked on by the government. This framework provides flexibility, he pointed out.

The deputy minister also made reference to a government support plan for the Kavala region that includes the development of an underground gas storage facility at a virtually depleted offshore gas field south of Kavala, and an upgrade of the city’s port.

Energean’s Competent Persons Report for Karish North completed

Energean Oil and Gas, the oil and gas producer focused on the Mediterranean, has announced the completion of an independent Competent Persons Report by DeGolyer and MacNaughton (D&M) on the Karish North Field, offshore Israel, and submission of an addendum to the Field Development Plan (FDP) to the State of Israel’s Ministry of Energy for Karish North.

Highlights

  • Karish North certified to contain gross 2C resources of 1.2 Tcf (33.7 bcm) of gas and 39 million barrels of liquids (mmbbls). This represents a total of 250 million barrels of oil equivalent (mmboe), of which 84% is gas. 
  • Delivers a 32% uplift to Energean’s previous Karish North resource best estimate, including approximately 0.3Tcf (9 bcm) of gas plus 5mmbbls of liquids, a total of approximately 60 mmboe (of which 90% is gas).
  • Total gross 2P + 2C across the Karish, Tanin and Karish North  is now estimated to be almost 3.5 Tcf (99 bcm) of gas plus 82 mmbbls of liquids, a total of  698 mmboe (88% of which is gas).
  • 0.6bcm/yr contingent Gas Sales and Purchase Agreements (GSPAs) will now be converted to firm; firm GSPAs will now deliver approximately 5.6bcm/yr of gas sales on plateau, with FPSO capacity of 8bcm/yr.
  • Energean continues to actively market additional gas volumes to secure additional long-term cash flows that are largely insulated from global commodity price fluctuations.
  • Energean has also submitted an addendum to the Karish and Tanin FDP, to cover the Karish North development, envisaging a production capacity of up to 300mmscf/d (approximately 3 bcm/yr), initially from one well.
  • Karish North Final Investment Decision (FID) expected during 2H 2020 with first gas in 2022.

Mathios Rigas, CEO of Energean said:

“I am delighted that 2C resources atKarish North are some 32% ahead of where we had initially expected. This has enabled us not only to convert 0.6bcm/yr of contingent contracts into firm, but also to continue targeting additional gas sales opportunities that will be incremental to the 5.6bcm/yr of firm gas sales that we now expect to deliver on plateau.We are very pleased to be developing a world-class gas resource of 700 millionboe and look forward to more gas discoveries in our acreage in Israel and the wider Eastern Med region.” 

Details of D&M CPR

Reserves & Resources

Following a full analysis of the results of both the Karish North discovery well and the side-track, D&M has certified that the Karish North field contains gross 2C contingent resources of 1.2Tcf (33.7 Bcm) of gas plus 39.4 million barrels of liquids (Energean 70%), a total of approximately 250mmboe. This represents a significant uplift of 0.3 Tcf (8.5 Bcm) of gas plus 5.4 million barrels of liquids (approximately 60mmboe) to Energean’s previous best estimate of Karish North volumes. Best estimate Gas Initially In Place (GIIP) is now 1.7Tcf (approximately 48 bcm).

Gross and working interest 1C, 2C and 3C are shown in the tables below.

In the CPR, Karish North resources are classified as contingent ahead of FID being taken on the project, which is expected during 2H 2020. Once FID has been taken resource volumes are expected to be reclassified as reserves, to the extent that they are underpinned by GSPAs.

D&M’s estimates are based on the results of the Karish North exploration and appraisal campaigns that were completed in 2019, coupled with an analysis of the recently re-processed and re-calibrated 3D seismic. The uplift in resource volumes largely results from the new conclusion that the Karish East structure is a part of the Karish North and Karish North-East structures, which were included in Energean’s original resource estimates. Following analysis of the re-processed and re-calibrated 3D seismic, Energean’s internal view is aligned with that of D&M, that Karish North, Karish North-East and Karish East form one structure.

Revised Gross Contingent Resource Volumes

Liquids

mmbbls

Sales Gas

Bcf

Sales Gas

Bcm

Total Oil Equivalent

mmboe

1C

21.4

642.7

18.2

135

2C

39.4

1,190.8

33.7

250

3C

55.6

1,701.7

48.2

357

Revised Working Interest Contingent Resource Volumes

Liquids

mmbbls

Sales Gas

Bcf

Sales Gas

Bcm

Total Oil Equivalent

mmboe

1C

15.0

449.9

12.7

95

2C

27.6

833.6

23.6

175

3C

38.9

1,191.2

33.9

250

Total, independently verified gross 2P reserves and 2C resources in the Karish and Tanin leases (Energean 70%) are now 3.5Tcf of gas (98.6 Bcm) and 82 million barrels of liquids, a total of approximately 698 million barrels of oil equivalent. Total gross recoverable 2P + 2C across theKarish and Tanin leases is presented in the following table.

Revised Gross 2P Reserve + 2C Resource Volumes

Liquids

mmbbls

Sales Gas

Bcf

Sales Gas

Bcm

Total Oil Equivalent

mmboe

Karish[1]

38.5

1,503.6

42.6

305

Karish North3

39.4

1,190.8

33.7

250

Tanin2

4.1

785.9

22.2

143

Total

82.0

3,480.3

98.6

698

Revised Working Interest 2P Reserves + 2C Resources

Liquids

mmbbls

Sales Gas

Bcf

Sales Gas

Bcm

Total Oil Equivalent

mmboe

Karish[2]

27.0

1052.5

29.8

213

Karish North3

27.6

833.6

23.6

175

Tanin2

2.9

550.1

15.5

100

Total

57.4

2436.2

69.0

489

Commercial & Financial Impact

Finalisation of the CPR results in the conversion of 0.6bcm/yr of conditional GSPAs to firm contracts. Energean Israel’s firm GSPAs now deliver sold volumes of 5.6bcm/yr on plateau. The CPR enables Energean to continue marketing its gas resources into the growing Israeli domestic market and key regional export markets, securing additional long-term cash flows that are largely insulated from global commodity price fluctuations.

Updated FDP

Energean has also submitted an addendum to the Karish and Tanin FDP, to cover theKarish North development, to the State of Israel’s Ministry of Energy Technical Department. Energean expects to take Final Investment Decision (FID) on the project in 2H 2020, with first gas expected during 2022. The FDP addendum envisages that two wells will be required to develop the greater Karish North structure. Phase 1 of the Karish North development will include the drilling of one well, tied back to the Energean Power FPSO, for the delivery of first gas in 2022. Phase 2 will include the drilling of a second production well around 2025, to optimise gas recoveries. The FDP allows for the production of up to 300mmscf/d through a dual flow line, which it is envisaged can be produced by a single well to start off with; Karish North reservoir properties are similar to those at Karish main. 

Energean is a London Premium Listed FTSE 250 and Tel Aviv 35 Listed E&P company with operations offshore Israel, Greece and the Adriatic. In March 2018, Energean took Final investment Decision on its flagship Karish and Tanin development, offshore Israel, which, following the discovery of Karish North, is estimated to contain approximately 700 million barrels of oil equivalent (Energean plc 70%), of which 88% is gas. Energean Israel’s firm Gas Sales and Purchase Agreements now deliver sold volumes of 5.6bcm/yr on plateau, providing sustainable, long-term cash flows that are underpinned by hard floor pricing and take-or-pay provisions.

Energean also has nine exploration licences offshore Israel, and a 25-year exploitation licence for the Katakolo offshore block in western Greece and additional exploration potential in its other licences in western Greece and Montenegro.

On 4 July 2019, Energean announced the conditional acquisition of Edison E&P for $750 million plus $100 million of contingent consideration. On 3 April 2020 it was announced that the acquisition agreement had been amended to exclude Edison E&P’s Algerian assets, accompanied by a reduction to the consideration of approximately $150 million. On 14 October 2019, Energean announced the conditional disposal of Edison E&P’s Norwegian and UK North Sea assets to Neptune Energy for $250 million plus $30 million of contingent consideration. These transactions are expected to close in 2020.

Greek upstream investments suspended, oil crisis hits hard

The current oil crisis, prompted by a Saudi-Russian price war and lower demand amid the coronavirus pandemic, comes as the latest setback for the upstream sector. The oil price slide, during which prices have plummeted to levels as low as 25 dollars per barrel, had added to the strain already felt by investors as a result of excessive bureaucracy in the Greek market.

Upstream players, troubled by the overall uncertainty, are believed to have suspended their investment plans despite a mild market rebound over the past few days, lifting oil prices to levels between 33 and 34 dollars per barrel.

Energean Oil & Gas’ Katakolo license off western Peloponnese and the Gulf of Patras license, co-owned by Hellenic Petroleum (ELPE) and Energean, rank as Greece’s two most mature upstream projects.

An environmental study for the Katakolo license has not yet been approved by the energy ministry. Even if it had, Energean would not move ahead with the venture under the existing market conditions. Current oil price levels would simply not cover investment costs.

Just before Christmas, investors behind the Gulf of Patras license were given an 18-month extension to begin drilling at this project, taking the date to June, 2021. Regional port facilities had been deemed insufficient by the consortium. All activity for this investment has also been suspended, sources informed.