Repsol leaving last Greek concession, domestic upstream aspirations fading

Spain’s Repsol is believed to be in the process of abandoning its last remaining hydrocarbon concession in Greece, an Ionian Sea block, even though the company has yet to officially notify EDEY, the Greek Hydrocarbon Management Company.

It remains to be seen whether ELPE (Hellenic Petroleum), Repsol’s partner in the Ionian Sea block, will follow suit and return its share to EDEY. ELPE officials have not clarified the group’s position.

Repsol previously returned to the Greek State its stake in an Etoloakarnania concession along with project partner Energean, and also transferred its stake in an Ioannina block to the Greek upstream company.

Like all major oil groups, Repsol has suffered major financial setbacks as a result of the pandemic and drop in oil prices, serving as catalysts in the company’s decision to restrict its exposure to the upstream sector.

At the beginning of this year, Repsol announced a decision to exit 14 countries, including Greece, from a total of 28 in which the company has held interests.

Upstream players are looking to readjust following the impact of the pandemic and more ambitious climate-change targets, including by the EU.

These developments appear to be shelving Greece’s ambitions for hydrocarbon discoveries following initiatives launched 11 to 12 years ago.

Both ELPE and Energean have requested and received extensions from EDEY for a series of concessions held within Greek territory.

Energean’s Prinos field losses seen reaching €32m in 2021

Upstream company Energean’s Prinos field concession, south of Kavala in northern Greece, is projected to incur yet another increase in losses this year, in excess of 32 million euros, according to a 2021 budget submitted by the company to EDEY, the Greek Hydrocarbon Management Company.

These losses, which do not include debt payments for investments made in previous years, will add to accumulated losses of 200 million euros incurred by the company through its operations at Prinos, Greece’s only active hydrocarbon field.

Production at the Prinos field is expected to narrowly exceed a total of 500,000 barrels this year, according to the company budget’s projections.

The budget’s projections were based on the assumptions of an average Brent index oil price of 60 dollars per barrel, reduced revenues of between 7 and 8 dollars per barrel at the Prinos field as a result of the inferior quality of oil produced, as well as a euro-dollar exchange rate of 1.20.

Based on these figures, the Prinos field’s revenue for 2021 is projected to reach 22.3 million euros, with expenses reaching 54.3 million euros.

Despite the negative results amid an unfavorable climate, Energean plans to recommence investments at the Gulf of Kavala’s “Epsilon” field with an amount of 13 million euros, part of total investments worth 23 million euros.

Prinos is currently producing from 14 wells, two out of which are horizontal at the North Prinos and Epsilon Fields.

The horizontal drills at the Epsilon field are expected to begin producing 15 months after the recommencement of investments.

These investments will include the completion of a new platform at the Lamda deposit, to emerge as the first new platform in Greece since 1977. Prinos began producing 40 years ago.

 

 

Energean signs contract with Stena for drilling effort, offshore Israel

Energean plc has announced that its 100% subsidiary, Energean Israel Limited, has signed a contract with Stena Drilling Limited for its 2022 – 2023 growth drilling programme offshore Israel, which is expected to target the derisking of unrisked prospective recoverable resources of over 1 billion barrels of oil equivalent (“boe“).

The contract is for the drilling of three firm wells and two optional wells, with the first firm well expected to spud in 1Q 2022. The firm wells are all expected to be drilled during 2022, and consist of:

  • The Karish North development well, a key part of the Karish North development. The scope includes re-entry, sidetracking and completion of the previously drilled Karish North well and completion as a producer. The Karish North development will commercialise 33 Bcm (1.2 Tcf) of gas plus 31 mmbbls of liquids 2P reserves (a total of 243 mmboe) and is expected to deliver first gas in 2H 2023.
  • The Karish Main-04 appraisal well, which is expected to target further prospective volumes within the Karish Main Block, including the potential oil rim that was identified as part of the KM-03 development well drilling. Total unrisked recoverable volumes estimated to be targeted by the well are 166 mmboe.
  • The Athena exploration well, located in Block 12, is situated directly between the Karish and Tanin leases. Athena is estimated to contain unrisked recoverable prospective resource volumes of 20 Bcm (0.7 Tcf) of gas plus 4 mmbbls of liquids; of which the primary target is estimated to contain unrisked recoverable prospective resource volumes of 10 Bcm (0.4 Tcf) of gas plus 2 mmbbls of liquids 1 with a 70% geological chance of success. Success at Athena would be expected to significantly de-risk approximately 90 Bcm (2.5 Tcf) plus 19 mmbbls of remaining unrisked recoverable prospective resource volumes located within Block 12 and Tanin.

Two factors support the commercialisation of a Block 12 discovery. Firstly, Block 12 was a new licence award to Energean Israel Limited in 2018; produced volumes will therefore generate no royalty payments in respect of Energean Israel Limited’s original acquisition of the block. Secondly, the more proximate location of the potential development to the expected location of the Energean Power FPSO is also expected to reduce like-for-like development costs when compared with Tanin.

The drilling campaign will be undertaken using the Stena Icemax drillship, a state-of-the-art ice-class harsh environment dual-activity dynamically positioned drillship, capable of drilling in water depths of up to 10,000 ft.

Mathios Rigas, Chief Executive Officer of Energean, commented:

“We are delighted to be working with Stena again; and this five-well programme follows the three-well development drilling programme and 243 mmboe Karish North discovery, all successfully executed with Stena over 2019 and 2020.

Our five-well growth programme offshore Israel, commencing 1Q 2022, has the potential to double Energean plc’s reserve base with resource volumes that can be quickly, economically and safely monetized. Combined with first gas from our flagship Karish gas development project in mid-2022, the next 12-months are set to be truly transformational for Energean.”

 

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: Completion of Acquisition of Edison E&P

Energean has completed its acquisition of Edison Exploration & Production S.p.A. (“Edison E&P“) from Edison S.p.A. (“Edison“), the company has announced in a statement. The gross consideration* for the transaction, as at the locked box date of 1 January 2019, is $284 million and the final net consideration (net of cash acquired) is $203 million.

Mathios Rigas, CEO of Energean, commented:

“Completion of our acquisition of Edison E&P marks a key milestone along our path to becoming the leading independent, gas-producer in the Mediterranean and significantly advances us towards our goal of delivering material free cash flows and shareholder returns in a sustainable way.”

Highlights:

  • The deal diversifies Energean into 9 countries of operation and provides a range of organic growth opportunities
  • Increases 2P reserves and 2C resources to in excess of 850 mmboe, app. 70% of which is gas
  • Provides a clear path to get us to production of 130,000 boepd once Karish is on stream and cements our position as the largest independent E&P listed in London
  • The integration plans are well-advanced and the process is progressing smoothly

 

Energean Power FPSO hull sails away from China

Energean Oil & Gas’ Enegean Power FPSO hull sailed away from the COSCO yard in China today and will now be towed to the Sembcorp Marine Admiralty Yard in Singapore, where the topsides will be integrated, before the completed FPSO is towed to the Karish field in Israel for installation and hook-up, the company has announced in a statement.

The sailaway of the hull from China represents the achievement of a key milestone in the Karish project timetable, the statement noted.

During the construction of the hull in China, more than 5 million man hours free of LTI’s have been completed. Including the construction of the topsides in Singapore and other relevant works, more than 10 million man hours free of LTI’s have been completed so far in the construction of the Energean Power FPSO.

Energean has also successfully completed the drilling of the three development wells in the Karish Main field and is confident that the three development wells can produce at combined rates of 800 mmscf/d, which is sufficient to fill the capacity of the FPSO (8 BCM per year), the company statement added.

On another important development, the Karish gas sales pipeline (30 & 24 inch) was shipped from Greece last week and offloaded successfully at Limassol Port, Cyprus.

The pipeline will be loaded from the Limassol port on PSVs and from them on the Karish Field pipe-laying vessel Solitaire.

The gas sales pipeline of approximately 90 km will transport gas from the Enegean Power FPSO to an onshore valve station at the Dor landfall in Israel.

First gas on the Karish project is on track for H1 2021.

Update on the Edison E&P acquisition

Also, Energean and Edison have entered into a formal amendment to the Sale and Pusrchase Agreement on 2 April 2020, in which:

  • the Algerian Assets shall be excluded from the scope of the acquisition of Edison E&P;
  • in recognition of the exclusion of the Algerian Assets, there will be an adjustment to the total consideration of the acquisition of approximately $150 million (as at the lock-box date of 1st January 2019).

Energean is working to complete the acquisition of Edison E&P as soon as is possible in 2020, subject to the approval of its shareholders and the other relevant governments, the company statement noted. Thereafter, completion of Energean’s agreement for the sale of Edison E&P’s UK and Norwegian subsidiaries to Neptune for a consideration of $250 Million plus contingent consideration of up to $30 million (as previously announced), will be completed as soon as is reasonably practicable, it added.