Israel

EuroAsia Interconnector fears abound after payment failure

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Questions continue to abound on the uncertain future of the beleaguered EuroAsia Interconnector project, aspiring to interconnect the electricity networks of Greece, Cyprus and Israel, after the project consortium leader’s denial of having missed a payment deadline last Friday.

Asked by the Cypriot newspaper Phileleftheros to comment on an energypress report stating that EuroAsia Interconnector, the Cyprus-headquartered consortium promoting the project, failed to meet a September 7 deadline for a 50 million-euro payment to Norwegian company Nexans as a first installment for cable supply, the consortium’s chief executive officer Nasos Ktorides denied the existence of any such deadline.

The CEO claimed EuroAsia Interconnector had no contractual obligation to make a first payment of 50 million euros to Nexans by last Friday for the construction and installation of a 1.4 billion-euro cable running from Crete to Cyprus.

Instead, Ktorides insisted that the EuroAsia Interconnector consortium respects all terms of its agreement with Nexans. The CEO acknowledged the existence of payment deadlines but refused to offer any dates.

As reported by energypress, the agreement between EuroAsia Interconnector and Nexans for a first installment by September 7 may not have been binding, but the consortium’s failure to make the payment does underline its financial issues.

The Cypriot government has kept a growing distance from the EuroAsia Interconnector project ever since the European Commission warned a 657 million-euro CEF sum secured for it would be reexamined if the project’s schedule is not maintained.

EuroAsia Interconnector fails to make first Nexans payment

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The beleaguered EuroAsia Interconnector project, aspiring to interconnect the electricity networks of Greece, Cyprus and Israel, has run into further trouble following its Cyprus-headquartered consortium’s failure to meet yesterday’s deadline for a 50 million-euro payment to Norwegian company Nexans as a first installment for cable supply.

This deadline was widely viewed as a crash test for the credibility of the consortium, spearheaded by Cypriot entrepreneur Nasos Ktorides, its chief executive officer.

The payment failure has given rise to various scenarios concerning the project’s future. Without a doubt, the Cypriot government wants this geostrategically important project to go ahead, while the European Commission, which has offered funding support worth 657 million euros, through the Connecting Europe Facility, can be expected to become more actively involved in an attempt to push the project forward.

Given its commitment to the EuroAsia Interconnector project, Greek power grid operator IPTO could also intensify its efforts to keep the grid interconnection project afloat.

IPTO has pledged to contribute 33 percent of the investment if legal due diligence is successfully completed, while an Israeli fund that has expressed interest could provide an equivalent amount. Under such a scenario, IPTO and the Israeli fund would hold 66.66 percent of the EuroAsia Interconnector project’s equity capital.

It remains unclear as to why the EuroAsia Interconnector consortium failed to meet yesterday’s payment deadline, despite having recently received the required 50 million-euro amount from the CEF. According to one resulting scenario, a new consortium could now be sought for the project’s development.

A growing number of Cypriot government officials have been distancing themselves from the Euroasia Interconnector project ever since Brussels’ recent warning that the 657 million-euro CEF sum secured for it would be reexamined if the project’s schedule is not maintained.

Cyprus’ energy minister Giorgos Papanastasiou recently noted the project is still 1.1 billion short of its 1.9 billion-euro budget, which was revised upwards from a previous total of 1.57 billion euros.

Euroasia Interconnector, short of €1.1bn, faces payment test

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The moment of truth is approaching for the promising yet troubled Euroasia Interconnector project, aspiring to interconnect the electricity networks of Greece, Cyprus and Israel but facing challenges in terms of its schedule and funding.

European Commission warnings over the project’s insufficient financing plan have raised concerns among authorities in Cyprus, where the Euroasia Interconnector consortium is headquartered. The consortium faces a September 7 deadline for a 50 million-euro payment to Norwegian company Nexans, for the construction of a cable. Tomorrow’s deadline represents a crash test for the consortium’s credibility.

A growing number of Cypriot government officials have been distancing themselves from the Euroasia Interconnector project since Brussels’ recent warning that EU funds worth 657 million euros secured by the project would be reexamined if the project’s schedule is not maintained.

The project’s challenges have been highlighted by the very statements of Cypriot government ministers and officials. Asked, just days ago, about Euroasia Interconnector, government spokesman Konstantinos Letymbiotis replied that the Cypriot government would first wait for a rating agency’s assessment of the project’s feasibility and geostrategic value before taking any decisions on its involvement.

Also, Cyprus’ energy minister Giorgos Papanastasiou has downplayed the significance of Greek power grid operator IPTO’s recent preliminary agreement with an Israeli fund for the latter’s entry into the equity capital of Euroasia Interconnector with a share of up to 33 percent.

This agreement would contribute roughly 100 million euros to the project, just a fraction of the Euroasia Interconnector’s budget, which has risen sharply to 1.9 billion euros from a previous estimate of 1.57 billion euros, Papanastasiou noted, when asked to comment on IPTO’s agreement with the Israeli fund.

This agreement’s anticipated 100 million euros, along with the Connecting Europe Facility’s 657 million euros, and a further 100 million euros from the Cypriot recovery fund, all totaling 857 million euros, still leaves the project’s required funding short of 1.1 billion euros, Papanastasiou pointed out.

East Med, Turkey on Nicosia’s Trilateral Summit agenda

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Israeli prime minister Benjamin Netanyahu is expected to stress that his country’s strategic alliance with Greece and Cyprus runs deep and will not be affected by Israel’s rapprochement with Turkey during today’s Trilateral Summit in Nicosia, whose agenda will include talks on all major east Mediterranean projects, current and prospective.

In statements made yesterday, Netanyahu noted decisions need to be reached to enable Israeli gas exports to the West, while making clear he will focus on two projects, the East Med gas pipeline and a liquefaction plant in Cyprus, during today’s meeting with Greek prime minister Kyriakos Mitsotakis and Cypriot president Nikos Christodoulides.

The East Med gas pipeline plan has been put on hold as a result of unfavorable developments over the past couple of years, but Greece and Cyprus have never abandoned the project.

Israel’s leader is determined to press ahead with plans facilitating the transportation of Israeli natural gas to European markets. Turkish president Recep Tayyip Erdoğan, meanwhile, considers a Turkish transit route for these Israeli gas exports to be of utmost importance.

The outlook on Turkish-Israeli ties currently remains unclear. Some clarity may be offered when Netanyahu soon visits Ankara. He is likely to make clear to his Turkish counterpart that the improvement in ties between Turkey and Israel, as well as between Greece and Turkey, will not undermine the strategic alliance developed over recent years between Greece, Israel and Cyprus.

External investor interest for Greece-Cyprus-Israel grid link

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A preliminary agreement between Greek power grid operator IPTO and an Israeli fund that would facilitate the fund’s entry into the equity capital of Euroasia Interconnector, the developer of the Greece-Cyprus-Israel grid interconnection, with a share of up to 33 percent, has ignited considerable investment enthusiasm in the project among external investors.

News of this strong investment interest was revealed by Cypriot Minister of Energy, Trade and Industry Giorgos Papanastasiou during a Parliamentary Energy Committee meeting held yesterday for a discussion on the project’s progress.

The parliamentary session took place just hours after IPTO’s preliminary agreement with the Israeli fund had been disclosed.

IPTO has already reached an agreement of its own with Euroasia Interconnector for a stake of at least 25 percent in the consortium, with an option to increase this stake to 33 percent.

Papanastasiou, the Cypriot minister, noted IPTO’s entry into the Euroasia Interconnector consortium serves as a vehicle for the Greek State’s involvement in the project. For the time being, the Cypriot State officially remains absent from the project.

“For us, it is inconceivable that the Republic of Cyprus should not be involved in such a project,” Papanastasiou noted.

Nevertheless, he emphasized that the Cypriot government is diligently assessing the matter. Given the project’s significant expenses, any decisions will be made after a comprehensive evaluation of the project’s technical and financial aspects.

The minister rejected claims suggesting the project would result in significant electricity tariff increases for Cypriot consumers, noting preliminary calculations indicate a cost increase of approximately 0.7 cents per KWh, which is just a fraction of Cyprus’s current retail electricity prices, reaching 35 cents per KWh.

IPTO in deal with Israeli fund for Euroasia Interconnector

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Power grid operator IPTO has reached a preliminary agreement with an Israeli fund facilitating its entry into the equity capital of Euroasia Interconnector, the developer of the Crete-Cyprus grid interconnection, with a share of up to 33 percent, according to confirmed information.

This development seems to have injected new life into the project, which has encountered notable challenges in recent times, namely strict warnings by the European Commission over schedule delays and, even more crucially, the developer’s inability to produce a sound financial plan, an issue that has prompted the Cypriot State to seriously reassess its participation in the project.

Highlighting the urgency of the matter, it should be noted that, on the basis of a contract signed recently by Euroasia Interconnector with Norwegian company Nexans for the construction of a cable for the Crete-Cyprus interconnection, Euroasia Interconnector faces a September 7 deadline for a 50 million-euro payment.

If IPTO’s agreement with the Israeli fund goes ahead, it confirms, on the one hand, Israel’s increased interest in the project, which will potentially interconnect the Greek, Cypriot and Israeli power grids, and, on the other hand, it should provide a solution to the existing financial gap that has generated doubts over the project.

IPTO and the Israeli fund’s equity participation in Euroasia Interconnector promises sufficient equity capital for the project, which in turn could facilitate project borrowing from the European Investment Bank, while also formulating a comprehensive financing plan for the project.

 

Euroasia Interconnector’s budget-increase need validated

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RAAEY, the Regulatory Authority for Waste, Energy and Water, has approved as valid a budget-increase request submitted by Euroasia Interconnector, the consortium promoting a project planned to interconnect the Greek, Cypriot and Israeli power grids, as the cost of materials, especially cables, have increased significantly.

The authority’s approval of the request highlights Greece’s support for the interconnection project.

The Euroasia Interconnector consortium has asked for the project’s budget to be increased by 350 million-euro budget increase, to 1.925 billion euros from the present level of 1.575 billion euros.

All parties involved with the Euroasia Interconnector project appear determined to push ahead following a recent warning from EU authorities that delays have placed under threat 657 million euros worth of Connecting Europe Facility (CEF) funding for the PCI-listed project.

The Euroasia Interconnector consortium now needs to provide detailed supporting documents to RAAEY and its Cypriot counterpart, RAEK, explaining the reasons why the budget revision has been requested.

Though a timeline has not been established, the Euroasia Interconnector consortium and the regulatory authorities are expected to act fast, given the political support for the interconnection project.

 

EastMed pipeline project still viable, Edison CEO says

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ROME (Reuters) – A project to build a 2,000 km pipeline to bring natural gas from East Mediterranean fields to Europe is still alive, the CEO of Italian energy group Edison (EDNn.MI) said on Friday.

Edison CEO Nicola Monti said that the group, which is one of the promoters of the pipeline, was actively talking with Cyprus and Israel about the project.

Last month, the energy minister of Cyprus told Reuters the country was proposing a shorter pipeline to bring gas from Israel’s East Mediterranean fields to the island where the gas could be partially liquefied to be transported to the European markets.

The shorter connection could be seen as an alternative to the more ambitious EastMed pipeline.

“A link between Israel and Cyprus can be a first portion of the (EastMed) pipeline we are promoting. Because from Cyprus we could then connect with Crete and Greece,” Monti said, speaking with journalists on the sidelines of a meeting of energy industrial lobby Confindustria Energia.

He said he believed that the total costs of building the EastMed pipeline would be lower than the investment needed to build a shorter Israel-Cyprus connection, a liquefaction plant and the expenses of shipping the gas to European markets.

Reporting by Francesca Landini Editing by Keith Weir

EuroAsia Interconnector funds threatened by project delays

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EU authorities appear to have issued a strict warning to Cyprus over major delays in binding scheduling terms for EuroAsia Interconnector, a project of strategic importance planned to interconnect the Greek, Cypriot and Israeli power grids.

According to sources, the EU has warned the Cypriot government that if appropriate decisions are not taken immediately to ensure that the project can be put back on track, then a decision offering 657 million euros worth of Connecting Europe Facility (CEF) funding for the PCI-listed project would need to be reviewed.

In response, Cypriot president Nikos Christodoulides held an emergency meeting last Friday with Nasos Ktorides, CEO of the EuroAsia Interconnector consortium, and the country’s energy minister George Papanastasiou.

Though no official announcements have been made, Cypriot press has reported that the government intends to engage directly and vigorously at the highest political level to secure the planned funding for the project.

Delays include Greek power grid operator IPTO’s entry into the EuroAsia Interconnector consortium with a 25 percent stake. A strategic agreement was announced at the end of June but the matter has not progressed further as due diligence remains unfinished.

The EU has insisted on IPTO’s participation as, on the one hand, the project will be connected to the Greek operator’s networks in Crete, and on the other, IPTO, it is believed, would ensure the project’s technical integrity and operational viability.

EuroAsia Interconnector has also been held back by the consortium’s delay in signing a contract with Norwegian company Nexans, to manufacture the project’s subsea cable.

This delay threatens to deprive EuroAsia Interconnector of its intended production slot at Nexans because the manufacturer faces high demand for cables from countries such as Germany and the Baltic countries as a result of Russia’s war in Ukraine.

 

 

 

PCI/PMI list preliminary ratings out, GREGY a borderline case

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The European Commission’s Directorate-General for Energy, preparing a shortlist of electricity projects for a sixth PMI/PCI list, including Projects of Mutual Interest and Projects of Common Interest, has just staged a teleconference with representatives of projects vying for a place on the list.

As for the PMI list, the Brussels officials, in addition to preliminary ratings for candidate projects, also presented their criteria and formula applied for appraisals.

The presentation of these details was necessary as, under the revised TEN-E Regulation, new PMI selection criteria are being used for the first time for projects also involving non-EU members.

According to energypress sources, the GAP Interconnector, an Egyptian-Cretan power grid interconnection project plan been promoted by the Eunice group, was not appraised, as had been expected, because it has not secured Letters of Support from the Greek state.

GREGY, another Greek-Egyptian grid interconnection plan, which is being promoted by the Copelouzos group, was given a preliminary rating of 9.3, just below the 10-level score required for inclusion on the PMI list.

GREGY project officials have until June 30, when the PMI shortlist will be announced, to enhance their project’s dossier with additional details that could boost its rating and secure a place on the PMI shortlist. Copelouzos group officials are confident this can be achieved.

The Euroasia Interconnector, planned to link the Israeli, Cypriot and Greek power grids, has amassed the points needed to secure its inclusion on the PMI shortlist.

A total of five European projects, two of these with Greek interests, have achieved preliminary scores offering places on the PCI shortlist.

One of the two Greek projects, Terna Energy’s pumped-storage station project plan for Amfilohia, northwestern Greece, was included on the EU’s PCI list in 2013, while all indications suggest it will retain its place on the list’s sixth edition.

The Eunice group’s Ptolemaida BESS, a 250-MW energy storage facility planned for Ptolemaida, northern Greece, has scored highly for a place on the revised PCI shortlist.

Israeli government recognizes Energean Katlan gas discovery

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The Israeli government has officially recognized Energean plc’s discovery of a natural gas deposit at its Block 12 Katlan (Olympus) license, located between the company’s Karish and Tanin licenses.

Israel’s minister of national infrastructures, energy and water resources Israel Katz awarded Energean CEO Mathios Rigas his approval of the Katlan discovery, estimated to contain 68 bcm.

The Israeli government last recognized a natural gas deposit in 2015.

From a legal perspective, the ministry’s approval enables Energean to lodge a development plan application, which, once endorsed, will pave the way for the development of the deposit. In a few years’ time, it is expected to offer additional natural gas quantities for the Israeli market and, possibly, exports.

Energean hopes its Katlan/Olympus deposit will be developed to deliver natural gas ahead of Tanin as the new discovery can be easily connected to the neighboring Karish deposit, already producing natural gas.

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Energean plc trading statement & operational update

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London, 18 May 2023 – Energean plc has announced an update on recent operations and the Group’s trading performance in the 3-months to 31 March 2023.

Highlights – Financial and Corporate

  • Revenues for the period were $288.8 million, a 69% increase versus Q1 2022 ($170.7 million)
  • EBITDAX for the period was $161.2 million, a 81% increase versus Q1 2022 ($89.6 million)
  • Group cash as of 31 March 2023 was $379.6 million (including restricted amounts of $11.5 million) and total liquidity was $943.5 million
  • Q1 2023 dividend of 30 US$ cents/share declared today, scheduled to be paid on 30 June 2023
  • Emissions intensity[1] for the period was 11.1 kgCO2e/boe, a 36% reduction versus Q1 2022 (17.2 kgCO2e/boe)
    • Emissions intensity1 in the four-months to 30 April 2023 was 10.1 kgCO2e/boe

Highlights – Operational

  • Production for the period was 94.4 kboed, a 161% increase versus Q1 2022 (36.1 kboed)
    • Production in the four-months to 30 April 2023 was 100.0 kboed (82% gas)
  • Commercial period under the gas sales agreements in Israel commenced for gas buyers on or before 1 April 2023[2], with production continuing to ramp up
  • Three hydrocarbon liquid cargoes cumulating in approximately 1 million bbls from Karish sold to Vitol year to date
  • The second gas export riser was successfully installed at Karish in March 2023; followed by key Karish North infrastructure in March and April 2023
  • Olympus development concept chosen to align with strategy to optimise free cash flows and shareholder value
    • Tie-back to Energean Power FPSO, with Olympus prioritised over Tanin
    • Production plateau maintained by monetising newly discovered resources that do not incur seller royalties nor carry export restrictions
    • Focus maintained on capital discipline: Lower cost development versus Tanin driving lower capital expenditure for the next phase of tie-backs to the Energean Power FPSO; plus avoiding significant capital expenditure to add capacity through FPSO expansion projects or a new FPSO/FPU
    • Production expected to underpin existing gas sales agreements plus target international markets that can be accessed through existing and planned third party infrastructure

Outlook

  • Full year production guidance revised to 125 – 140 kboed (from 131 – 158 kboed) due primarily to:
    • Revised gas sales forecast in Israel with full year quantities now expected to be 4.5 – 5.0 bcm (versus 4.5 – 5.5 bcm) due to the ramp up profile of buyer offtake and ongoing optimisation of the operations of the Energean Power FPSO
    • Higher-than-expected decline from NEA#6 in Egypt following the positive initial flow rates. There is no expected read-across to the PY#1 and NI#1 wells; extended flow testing is required at NEA#5 to confirm no read-across for this well. These three remaining NEA/NI wells are expected onstream over the course of 2023; NEA#5 drilling was completed in May 2023 with results in line with pre-drill geological expectations.
  • Karish growth projects on track for completion by end-2023
  • On track to deliver near-term targets of 200 kboed, $2.5 billion revenues, $1.75 billion EBITDAX and leverage < 1.5x in 2H 2024, and pay dividends in line with previously communicated policy
  • Final investment decision on the Olympus Area expected in late 2023
  • Orion 1X spud expected towards the end of the year

Mathios Rigas, Chief Executive Officer of Energean, commented:

“We are ramping up production from the Karish field and have seen four months of solid gas and liquids production in Israel, whilst optimising the operations of the Energean Power FPSO. Our Israeli gas contracts have moved to commercial status and our buyers are increasing nominations. This year, Energean expects to supply a significant proportion of Israel’s gas demand.

“This is why we are moving quickly to develop our newly discovered Olympus Area resource, as efficiently as possible. As there is limited incremental capex, the initial development concept is in line with our stated commitment to remain capital disciplined. With no seller royalty payments or export restrictions, this strategy will create sustainable value for all our stakeholders and allow us to maintain and grow our stated sector-leading dividend policy.

“We continue to focus on our Net Zero stated path through continuous reductions in our carbon intensity. We are and will remain a responsible hydrocarbon producer. We are committed to being the best version of Energean we can be: provide a secure and reliable energy supply, support our communities and underwrite the transition.”

 

[1] Scope 1 and 2 emissions

[2] With the exception of one GSPA, whose commercial period begins in November

Energean plc: 2022 Full-Year Results  

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London, 23 March 2023 – Energean plc (LSE: ENOG, TASE: אנאג) has announced its audited full-year results for the year ended 31 December 2022 (“FY 2022“).

Mathios Rigas, Chief Executive of Energean, commented:

“2022 was a year of transformation for Energean – where a long-held vision became an operational reality. It was a year of positive delivery. We commenced production from the only FPSO in the strategically vital Eastern Mediterranean region, paid dividends to our shareholders, and laid the foundation for our future growth through the discovery and de-risking of new natural gas resources adjacent to our infrastructure. Energean was the sole owner-operator of five deepwater wells, which drove a 20% increase in our reserve base, and marked the 15th consecutive year of reserve and resource base increases for Energean. We are proud to be on track to deliver between 4.5 and 5.5 bcm of gas into the Israeli domestic gas market this year, contributing towards the security of energy supply of the region and improving the living conditions of the Israeli public through the reduction of emissions from the displacement of coal-fired power generation.

“The first quarter of 2023 has continued the positive trend. Production from Karish is in line with our expectations, and in February we supplied the first Israeli hydrocarbon liquids export cargo to international markets. In Egypt, we achieved first gas at NEA/NI with three further wells due to come onstream during the year. In Italy, we are the third largest producer of natural gas and look forward to increasing our contribution towards the country’s energy supply. And in Greece, we are continuing our efforts to explore the untapped resources of the country.

“The remainder of 2023 will see us present the development concept for the Olympus Area, offshore Israel, and increase the capacity of the Energean Power FPSO to 8 bcm/yr. This is alongside delivery of production in line with guidance and deliver on-target returns, as promised, to our shareholder base. Through our gas contracting strategy we are in a unique position to have a very predictable and stable cashflow despite turbulence and challenges in the international financial markets.

“We are committed to investing in projects where we can create value for all stakeholders. The global energy crisis is not over – the global gas market remains dangerously tight and benefitted from a mild European winter, but thousands of industrial jobs are now at risk not just to price but also to availability. We therefore hope that governments understand the value of enhanced domestic and regional energy production, that can only be delivered through long-term investment.”

Highlights

  • Delivered first gas from Karish in October 2022
    • Production and ramp up in line with expectations
    • Energean is now sequentially notifying gas buyers that the commissioning period under the gas sales and purchase agreements (“GSPAs”) has ended and the start date for commercial obligations has commenced. It expects to have completed this process for all gas buyers by the end of March 2023
  • Initiated hydrocarbon liquid exports from Karish field to international markets
  • Delivered first production from NEA/NI, Egypt, in March 2023
  • On track to deliver 200 kboed production target in 2H 2024
  • Confirmed year-end 2P reserves of 1,161 mmboe (+20% increase versus end-2021) representing a reserve replacement ratio of 1400%
    • Including the addition of 31 bcm (approximately 206 mmboe) of 2P reserves in the Olympus Area, offshore Israel, that have now been certified by Energean’s reserve auditor, Degolyer and McNaughton (“D&M”)
  • Delivered strong financial performance, underpinned by strong commodity prices
    • 2022 revenues of $737.1 million, represented a 48.3% increase (2021: $497.0 million)
    • 2022 EBITDAX of $421.6 million, represented a 98.8% increase (2021: $212.1 million)
    • 2022 profit-after-tax of $17.3 million, was an improvement on last year’s loss (2021: $(96.2) million). Profit after tax was negatively impacted by $119.4 million of windfall taxes in Italy[1], which are expected to have been applied on a one-off basis
    • Group cash as of 31 December 2022 was $502.7 million (including restricted amounts of $74.8 million) and total liquidity was $720.0 million. In March 2023, Energean signed a $350 million term loan providing additional financial flexibility
  • Announced dividend strategy and initiated dividend payments
    • Cumulative dividends paid of 60 US$ cents with a further $30 US$ cents declared and not paid, representing an annualised yield of approximately 9%[2].
  • Carbon Disclosure Project (“CDP”) rating increased to A- (from B), outperforming the global average for E&Ps of C

Outlook

  • 2023 production guidance confirmed at 131 – 158 kboed, including 4.5 – 5.5 bcm of gas from Karish
  • Mid-term targets now considered near-term: on track to achieve production, financial targets, and leverage targets in 2H 2024[3] through execution of key development projects
    • Karish growth projects to increase the capacity of the Energean Power FPSO are on track for year-end 2023, following which Israel production is expected to be more than 140 – 155 kboed
    • Three additional wells to be brought onstream at NEA/NI by year-end 2023, following which production in Egypt is expected to be more than 40 kboed
    • Cassiopea expected to deliver first gas in 2024, following which production in Italy is expected to be approximately 20 kboed
  • Communication of development concept for the Olympus Area expected in the coming months
  • Orion X1 well, Egypt, (Energean 30%, expected to farm down to 18%) expected to spud in late 2023, slightly delayed due to rig availability
  • Declaration of quarterly dividends in line with previously communicated policy
    • $50 million per quarter initially, rising to $100 million per quarter following achievement of near-term targets
    • Cumulative dividends of at least $1 billion by end-2025
    • Post-2025 target to maintain a progressive dividend policy, underpinned by existing reserve volumes

Financial Summary

 

    FY 2022 FY 2021 % Change
Average working interest production kboed 41.2 41.0 0.5%
Sales and other revenue $ million 737.1 497.0 48.3%
Cash Cost of Production $ million 284.3 261.6 8.7%
Adjusted EBITDAX[4] $ million 421.6 212.1 98.8%
Profit/(loss) after tax $ million 17.3 (96.2) 118.0%
         
Capital expenditure $ million 728.8 403.5 80.6%
Exploration expenditure $ million 141.0 48.7 189.5%
Decommissioning expenditure $ million 8.9 2.7 229.6%
         
Cash (including restricted amounts) $ million 502.7 930.5 (46.0%)
Net debt – consolidated $ million 2,518.2 2,016.6 24.9%
Net debt – plc excluding Israel $ million 143.8 102.6 40.2%
Net debt – Israel $ million 2,374.4 1,914.0 24.1%

 [4] During 2022, Italy introduced: 1) a windfall tax in the form of a law decree which imposed a 25% one-off tax on profit margins that rose by more than 5 million euros between October 2021 and April 2022 compared to the same period a year earlier. The amount of the windfall tax paid by Energean Italy was $29.3 million and 2) In November 2022, Italy introduced a new windfall tax that imposed a 50% one-off tax, calculated on 2022 taxable profits that are 10% higher than the average taxable profits between 2018-2021. This amount has a ceiling equal to 25% of the value of the net assets at end-2021. Based on this, Energean would be required to pay an additional one-off tax of €87 million in June 2023.

[4] Based on 21 March 2023 share price of GBp 11.00

[4] On an annualised basis

[4] Adjusted EBITDAX is calculated as profit or loss for the period, adjusted for discontinued operations, taxation, depreciation and amortisation, share-based payment charge, impairment of property, plant and equipment, other income and expenses, net finance costs and exploration and evaluation expenses.

Greek-US energy agenda focused on 3 projects

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Three energy infrastructure projects, the Alexandroupoli FSRU in Greece’s northeast, an oil pipeline running from the Alexandroupoli port to Burgas, on Bulgaria’s Black Sea coast, and a Greek-Egyptian grid interconnection, were focal points in talks yesterday between Greek and American officials, as part of US Secretary of State Anthony Blinken’s official visit to Athens.

The two sides, meeting for the 4th round of a Greece-US Strategic Dialogue, appeared determined to push ahead with the three projects, propelled by Russia’s war on Ukraine, which has prompted Europe to move in a direction ending its reliance on Russian fossil fuels.

It was agreed that Athens and investors need to accelerate efforts for the aforementioned projects to further marginalize Russian energy supply to Europe.

Besides offering full support for the three energy infrastructure projects, US officials also expressed satisfaction about the recent launch of the Greek-Bulgarian IGB gas pipeline as well as ongoing plans for a pipeline to run from Greece to North Macedonia.

However, the US officials kept a distance from the discovery of gas deposits by Israel, Cyprus and Egypt in the east Mediterranean, as well as the East Med gas pipeline plan – which would connect Israel, Cyprus and Greece before crossing to Italy visa the Poseidon pipeline – presumably to avoid upsetting Turkey, despite problems that have weighed down US-Turkish ties of late.

 

US subdued on East Med plan despite anticipated revival

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US Secretary of State Anthony Blinken has praised Greece’s leading role concerning the region’s energy transition in his opening remarks at the start of the 4th round of the Greece-US Strategic Dialogue, while underlining that the US is grateful for Greece’s unwavering support for Ukraine.

“Greece’s transition is a model for the region,” Blinken stressed, recalling that renewable energy sources such as wind and solar have, in recent times, provided half of Greece’s electricity needs, which he said was equivalent to taking 3 million cars off the roads.

The US Secretary of State also praised Greece’s role in supporting neighboring countries to diversify their energy sources by reducing their dependence on Russia, such as Bulgaria.

However, the US appears unmoved by Israel’s renewed interest for the development of the East Med gas pipeline, which would connect Israel, Cyprus and Greece before crossing to Italy visa the Poseidon pipeline. This project would greatly contribute to Europe’s efforts aiming to end the continent’s reliance on Russia for fossil fuels.

Contrary to expectations, the East Med project has not been included on the agenda of talks for Blinken’s official two-day visit to Athens, today and tomorrow, reliable sources informed.

Roughly a year ago, the US had announced it could not support this pipeline project, attributing this stance to a lack of feasibility. But the country’s willingness to maintain a balance in its regional geopolitical interests, especially between Greece and Turkey, is most likely the underlying reason.

Despite difficulties faced in its ties with Turkey, the US appears unwilling to support a regional gas pipeline project that would sideline this NATO ally.

Analysts expect new round of gas price increases this year

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Analysts are projecting an eventual rise in gas prices over the next few months as a result of the combined effect of several factors, the main one being Europe’s almost entire dependence, these days, on imported LNG.

This LNG dependence, following Europe’s drift away from Russia, along with Europe’s limited LNG gasification infrastructure, until at least 2025, will inevitably lead to price increases at some point in 2023, analysts have noted.

Natural gas prices have been falling in recent times and are expected to, once again, drop below the price level of coal. This price descent, analysts believe, will reignite industrial activity in Europe, boosting gas demand.

Also, Chinese production, currently operating at below full capacity as a result of the country’s strict adherence, until recently, to a zero-Covid policy, is also expected to get back into top gear within 2023.

In addition, if Europe avoids recession, then global gas orders will skyrocket.

Taking these factors into account, Europe needs to maintain links with pipeline gas supply if energy security is to be ensured on the continent, analysts have noted.

This highlights the significance of projects such as the East Med gas pipeline plan, now seeming to be back in favor. It promises to connect Israel, Cyprus and Greece, over a total distance of 2,000 kilometers, before crossing to Italy via the Poseidon pipeline, a 210-kilometer stretch.

Israel injecting new life into East Med gas pipeline project

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The newly elected Israeli government appears set to inject new life into the prospective East Med gas pipeline, its interest emerging one year after the US had announced it would no longer support the project, a stance now likely to be revised.

Israeli foreign minister Eli Cohen expressed the country’s interest in the project to his Greek counterpart Nikos Dendias during the latter’s official visit to Israel earlier this week.

The prospective pipeline is planned to cover a total distance of 2,000 kilometers, of which over 1,400 kilometers will run underwater, to connect Israel, Cyprus and Greece before crossing to Italy visa the Poseidon pipeline, a 210-kilometer stretch.

“We agreed to the exportation of Israeli gas through Greece and Cyprus, which will reach all of Europe. At a time of global energy crisis, it will strengthen our international position and bring a lot of money to the country,” Cohen, Israel’s foreign minister, announced following his meeting with his Greek counterpart.

Reiterating this interest, Israeli prime minister Benjamin Netanyahu, who has returned to the country’s top post after his Likud party formed a coalition with ultranationalist and ultra-Orthodox Jewish allies, announced that he instructed the head of Israel’s National Security Council to initiate a trilateral meeting of the leaders of Greece, Israel and Cyprus for energy-related talks.

Tel Aviv is seeking to reimpose itself as a force in eastern Mediterranean energy matters.

The East Med gas pipeline plan is likely to be on the agenda when US secretary of state Antony Blinken visits Athens on February 21 and 22.

East Med has gained renewed significance as Europe is looking for alternative sources of natural gas and major oil companies, especially US firms such as ExxonMobil, focusing on a venture south of Crete, are involved in hydrocarbon exploration efforts in the eastern Mediterranean.

Given the strained Israeli-Turkish ties, Israeli officials know well that the development of a gas pipeline across Turkey is not a viable option.

Energean moving ahead with wider exploration and development plan

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Energean is moving ahead with its exploration and development program both in Israel and in other Mediterranean markets following the commencement of production at its Karish field, offshore Israel, and positive results from the neighboring “Zeus” and “Hermes” wells.

Energean has reported significant developments regarding the installation of a second processing line at its Karish North field, which promises to upgrade production to 8 billion cubic meters and 32,000 barrels of oil in total. The upgrades are expected to be completed by the end of 2023.

Along with its first-half results, the company has noted its next step is first gas production from the NEA/NI license in Egypt. Subsea installations have been completed and gas production is expected to commence by the end of this year.

Meanwhile, Energean plans to conduct four more drilling efforts at its Abu Qir licence, also in Egypt, in 2023 and 2024.

As for its offshore Cassiopea license in Italy’s Strait of Sicily, Energean plans to begin gas production in the first half of 2024 with an objective to boost its production in Italy from 9,300 bpd at present to 20,000 bpd.

Energean has made two important discoveries at its Athena and Zeus offshore Israel licenses, both west of Karish. The Athena field has been certified, by an independent appraiser, as having potential reserves (2C) of 11.75 bcm of natural gas, while, two weeks ago, an initial estimate of 13.3 bcm of natural gas was made for the Zeus field.

Energean has also made a third discovery further south, at Block 31 (Hermes deposit), estimated to be holding between 7 and 15 billion cubic meters. Drilling at the Hercules well, in the same area, has been in progress over the past few weeks.

Energean has announced it will have a report, from an independent appraiser, on the potential of new discoveries in early 2023, the company’s aim being to present a specific development plan in the first half of the year.

Options being considered for additional volumes include the sale of additional gas to the Israeli market, exports to Egypt, as well as exports to Cyprus with the prospect of liquefaction for sales of quantities to European markets.

Energean has already signed contracts for the supply of 7.2 billion cubic meters of gas to Israel. Significant quantities are expected to start reaching customers in 2023.

Energean plc commercial gas discovery at Zeus, offshore Israel

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London, 7 November 2022 – Energean plc has announced that i) the Zeus-01 exploration well, offshore Israel, has made a commercial gas discovery of 13 bcm ii) contingent resources at neighboring Athena have been upgraded following post-well analysis; and iii) the Stena IceMax drilling rig has moved to block 23 to drill the Hercules structure, the final well in Energean’s 2022 drilling campaign.

Zeus well results

The Zeus exploration well, block 12, offshore Israel, has made a commercial discovery with preliminary estimates indicating that the structure contains 13.3 bcm of recoverable natural gas resources (pre-drill estimate 10 – 12 bcm). Energean is now undertaking post-well analysis of the data collected during drilling.

Athena resource upgrade

Energean’s reserve auditor, DeGolyer & MacNaughton (“D&M”), has certified contingent resources of 11.75 bcm in the Athena discovery, an increase of 3.75 bcm on the Company’s 8 bcm preliminary estimate. This increase follows post well studies undertaken on data collected during the drilling process.

Olympus area

The results from the Zeus well and the Athena post-well analysis provide Energean with additional confidence about the volumes and commerciality of the Olympus area, and the Company is now progressing its field development plan. Energean expects to update the market on the total resource volumes within the Olympus area, taking into account the uplifted volumes in both Zeus and Athena, in early 2023. This update will be based upon a Competent Persons Report that is being undertaken by D&M.

Hercules well

The Stena IceMax has now moved to block 23 to drill the Hercules structure, where the Miocene gas prospect will be targeted.

Mathios Rigas, CEO of Energean commented:

“Following the start of production from our Karish reservoir last week, I am pleased that our drilling programme, which has now delivered five successful wells from five, continues to deliver value, ensuring security of supply and energy competition across the region. We are evaluating a number of potential commercialisation options for the Olympus area that leverage both new and our existing, unique Med-based infrastructure, and we expect to commit to a development concept in 1H 2023. ”

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IPTO set to join EuroAsia Interconnector by year’s end

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Power grid operator IPTO is expected to join EuroAsia Interconnector, a Cypriot company established to link the Greek, Cypriot and Israeli power grids, by the end of the year.

IPTO’s anticipated board approval of the company’s agreement with EuroAsia Interconnector is the next step in IPTO’s process of acquiring a stake in the company, expected to be at least 25 percent.

EuroAsia Interconnector accepted an official proposal submitted by IPTO in late July. Speaking at the recent Thessaloniki International Fair, IPTO president Manos Manousakis noted EuroAsia Interconnector’s acceptance of the Greek power grid operator’s terms ensures IPTO’s participation in the Greek, Cypriot and Israeli power grid interconnection, a project of strategic importance.

Once the IPTO board approves the agreement, the operator will need to conduct due diligence, expected to take place within the next month or two.

The deal for IPTO’s acquisition of a stake in EuroAsia Interconnector is expected to include terms for a further stake increase in the Cypriot company.

The agreement’s technical and financial details promise to propel the development of the Crete-Cyprus segment of the overall project, the most mature of all segments.

The Crete-Cyprus segment will end the electricity isolation of Cyprus, the EU’s only remaining member state still disconnected from fellow member states, and also boost Greece’s role as an electricity transmission hub in southeast Europe.

A total of 898 kilometers of subsea cables are planned to be installed at a depth of up to 3,000 meters for the Crete-Cyprus grid link.

 

Energean Power FPSO arrives at Israel location

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Energean plc has announced the Energean Power FPSO’s arrival on location in Israel.

The FPSO was transported by two tugs from Sembcorp Marine’s Admiralty Yard in Singapore to Israel. The 5,532 nautical mile-long journey took 35 days, crossing six seas and passing through the Suez Canal.

Energean will immediately commence hook-up and commissioning operations, which includes risers and jumpers installation as well as the commissioning of the sales gas pipeline. Energean expects approximately three – four months of commissioning before first gas, which remains on track for Q3 this year.

Mathios Rigas, Chief Executive Officer of Energean, commented:

“I am delighted to confirm that the Energean Power FPSO has arrived on location in Israel. This marks a major step forward in delivering first gas from Karish which remains on track for Q3 2022. We look forward to continuing our progress through Karish first gas, the commercialisation of the newly defined Olympus Area and contributing to energy security and competition of supply for the region.”

 

 

Israeli power grid operator officials in Athens for grid link

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The energy ministry and power grid operator IPTO seem determined to press ahead with two major grid interconnection projects, one to link Greece with Cyprus and Israel, the other Greece and Egypt, REPowerEU, Europe’s strategic plan aiming to end the continent’s reliance on Russian fossil fuels through energy-source diversification, being the driving force behind this action.

IPTO, according to sources, is just about ready to forward a proposal for participation in EuroAsia Interconnector, a consortium established for the development of the Israel-Cyprus-Greece grid interconnection.

Highlighting the activity concerning the project, officials of Israel’s power grid operator are in Athens for talks today with IPTO’s chief executive Manos Manousakis and other company officials.

The Israeli officials will also take part in an ensuing meeting with Greek energy minister Kostas Skrekas.

Israeli interest in the grid interconnection has grown following the European Commission’s decision to make available 657 million euros for the project’s Cyprus-Greece section.

The Israel-Cyprus-Greece grid interconnection will facilitate RES development in Israel, promising to contribute to the EU-27 aim for an end of Europe’s reliance on Russian fossil fuels.

The grid link, to measure 1,208 kilometers and offer a 1-GW capacity, will also end Cyprus’ energy isolation and offer energy security to Israel.

It is budgeted at 2.5 billion euros with completion slated for the end of 2025, if procedures go according to plan.

Manousakis, the IPTO chief executive, plans to visit Cairo during June for talks with officials at Egypt’s power grid operator, EETC. Progress on the prospective Greek-Egyptian grid link has been smooth. The two sides are now preparing for a feasibility study.

Skrekas, the energy minister, is expected to be in Egypt sooner, to take part in the East Med Gas Forum, scheduled for June 14 and 15. He is expected to meet with Egyptian energy ministry officials on the sidelines of this event, for talks on the Greek-Egyptian grid link.

This project, based on a proposal from the Copelouzos group, entails a subsea cable from Egypt to the Greek capital.

It is budgeted at 3.5 billion euros and will offer a 3-GW capacity for renewable energy, which will also be exported to other EU member states through grid interconnections linking Greece with neighboring countries.

Energean plc announces Athena gas discovery, offshore Israel

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London, 9 May 2022 – Energean plc (LSE: ENOG, TASE: אנאג) has announced a commercial gas discovery by the Athena exploration well, offshore Israel.

Highlights

  • Commercial discovery made by the Athena exploration well, Block 12, in the A, B and C sands. Preliminary analysis indicates that the Athena discovery contains recoverable gas volumes of 8 bcm (283 bcf / (51 mmboe) on a standalone basis.
  • This discovery is particularly significant as it de-risks an additional 50 bcm (1.8 tcf / (321 mmboe) of mean unrisked prospective resources across Energean’s Olympus Area (total 58 bcm / 372 mmboe including Athena).
    • The Olympus Area is Energean’s newly defined area which includes Athena, plus the undrilled prospects on Block 12 and the adjacent Tanin Lease.
  • Athena can be commercialised in the near-term via tie-back to the Energean Power FPSO, enhancing the profitability of the Karish-Tanin development. Alternatively, it could form part of a new Olympus Area development.
  • Energean is therefore actively pursuing development options for the commercialisation of the wider Olympus Area, (potentially including Athena), such as:
    • Further domestic Israeli gas sales:
      • New Gas Sales and Purchase Agreements (“GSPA”) underpinned by the continued growth of the Israeli power market
      • Spot sales
    • Export options:
      • Developing the Memorandum of Understanding (“MoU”) signed with The Egyptian Natural Gas Holding Company (“EGAS”) for the supply of up to 3 Bcm/yr into a binding agreement
      • Exports to other regional and European markets via pipeline and LNG via Cyprus and/or Egypt
  • The economics of gas produced and sold from Block 12 are not subject to royalties payable to the original sellers of the Karish and Tanin leases, leading to an approximate 8% increase in revenue for the same volumes sold, when compared with the Karish and Tanin discoveries

Mathios Rigas, Chief Executive of Energean, commented: 

“We are delighted to announce this new gas discovery at Athena and the potential of the wider Olympus Area. We are considering a range of strategic commercialisation options both for a standalone and wider Olympus Area development, including domestic and multiple export routes.

“This discovery and the broader de-risking of a number of prospects in the Olympus Area reaffirms the role of the East Mediterranean as a global gas exploration hotspot. It strengthens our commitment to provide competition and security of supply to the region, enables the optimisation of our Israel portfolio and fulfils one of our key milestones for 2022.”

Athena Gas Discovery

Athena Well Results

The Athena exploration well was drilled on Block 12 (Energean Israel, 100%), located 20 kilometres from Karish and 20 kilometres from Tanin A, in a water depth of 1,769 metres. It was drilled in 51 days and came in below the budget of $35 million. The Athena exploration well is the fifth well in a row that has been drilled successfully by Energean in Israel.

A gross hydrocarbon column of 156 metres was encountered in the primary target (the A, B and C sands). Preliminary analysis indicates that the Athena discovery contains recoverable gas volumes of 8 bcm (283 bcf / (51 mmboe) on a standalone basis. Additional analysis will now be undertaken to further refine the full resource potential (including volumes contained within thinner sands between the main reservoir units) and to confirm the liquids content of the discovery.

The Athena well has been suspended as a future production well.

Commercial hydrocarbons were not discovered in the deeper secondary target (22% Probability of Success, D sands).

Multiple Commercialisation Options Under Consideration

Athena can be commercialised in the near-term via tie-back to the Energean Power FPSO, enhancing the profitability of the Karish-Tanin development. Alternatively, it could form part of a new development called the Olympus Area.

Energean’s Olympus Area consists of Block 12 and the prospects on the Tanin lease. The discoveries and prospects in this area lie along the same geological trend and Athena was drilled on the same direct hydrocarbon indicator (shown in the seismic analysis) as Tanin. As such, Energean is confident that the Athena discovery has de-risked the A, B and C sands in the remaining prospects of the Olympus Area, estimated to be 50 bcm (1.8 tcf / (321 mmboe) of mean unrisked prospective resources (total 58 bcm / 372 mmboe including Athena). This estimate excludes the liquids component as well as any gas upside in the thinner sands between the main reservoir units.

Energean has identified multiple commercialisation options for the Athena discovery and potential future Olympus Area development, including both domestic customers and export routes. These options include:

  • Further domestic Israeli gas sales:
    • New GSPAs underpinned by the continued growth of the Israeli power market
    • Spot sales (spot contract signed with the Israel Electric Corporation (“IEC”) in March 2022)
  • Export options:
    • Developing the MoU signed with EGAS into a binding agreement. The MoU was signed in December 2021 for the sale and purchase of up to 3 bcm/yr of natural gas on average for a period of 10 years, commencing with initial volumes of up to 1 bcm/yr.
    • Exports to other regional and European markets via pipeline and LNG via Cyprus and/or Egypt

Block 12 (including Athena) benefits from an absence of any seller royalties on production or constraint on export from the lease, improving the economics versus the Karish and Tanin leases.

Remaining Drilling Campaign

The Stena IceMAX has now moved to the Karish Main-04 appraisal well, of which the top hole has already been drilled. The rig will then complete the Karish North development well. A decision on whether to drill the previously communicated optional wells (Hermes and/or Hercules) is expected to be made by the end of Q2 2022.

 

Talks in progress for Italy’s East Med gas pipeline entry

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Talks are in progress for Italy’s official entry into the East Med gas pipeline project, a prospective 2,000-km pipeline planned to carry natural gas to Europe via Greece, Cyprus, Israel and Italy, energypress sources have informed.

Greece, Cyprus and Israel signed an agreement for the project’s development in 2020, without Italy’s participation, as the country’s government at the time, citing environmental issues, had reacted against the project reaching its shores.

Italy’s current Prime Minister, Mario Draghi, recently stressed that the East Med gas pipeline needs to be pursued as a result of Russia’s invasion of Ukraine.

The project has now gained political support in Italy, through a resolution issued in parliament urging the government to co-sign the transboundary agreement, energypress sources informed.

Italy has revised its stance on the East Med project as a result of a recent EU-27 decision to drastically reduce Europe’s reliance on Russian natural gas.

Italy could officially announce, in May, its intention to co-sign the East Med agreement, sources informed.

Greece, Cyprus, Israel look to push ahead with key projects

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The prospective East Med gas pipeline and a subsea electricity grid interconnection, projects that would link Israel with Cyprus and Greece and which are being heavily promoted as a result of the EU’s new energy policy, aiming to end the continent’s reliance on Russian gas as soon as possible, are expected to dominate the agenda of today’s trilateral meeting in Jerusalem between the energy ministers of Greece, Cyprus and Israel.

Energy company representatives will, for the first time, also be participating in a trilateral meeting of energy ministers involving the three countries, highlighting the determination of all three countries, and the EU, for swift progress on projects and agreements that would contribute to greater energy diversification for Europe.

Greek energy minister Kostas Skrekas will be accompanied by Kostas Xifaras, chief executive of gas company DEPA Commercial; Mathios Rigas, CEO of upstream company Energean; and Manos Manousakis, CEO of Greek power grid operator IPTO.

Representatives of corresponding Cypriot and Israeli companies will also be taking part in today’s trilateral meeting.

Prospects for the development of the EuroAsia electricity grid link promising to connect the three countries have grown considerably as Israel appears to have swept aside previous reservations. Israel has wanted the completion of the Crete-Cyprus link as a prerequisite ahead of further development.

 

 

Greece, Cyprus, Israel prepare to discuss East Med, power grid link

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The East Med gas pipeline and a subsea electricity grid interconnection to link Israel with Greece and Cyprus, projects whose prospects have grown as a result of the EU’s new energy policy, aiming to end the continent’s reliance on Russian gas as soon as possible, are expected to dominate the agenda at an upcoming trilateral meeting between the energy ministers of Greece, Cyprus and Israel.

The session is planned to take place in a fortnight’s time or immediately following the Greek Easter period, culminating on April 24.

Italian Prime Minister Mario Draghi recently stressed that development of the East Med gas pipeline, a prospective 2,000-km pipeline planned to carry natural gas to Europe via Greece, Cyprus, Israel and Italy, needs to be pursued as a result of Russia’s invasion of Ukraine.

A consortium formed by Greek gas company DEPA and Italy’s Edison is continuing its studies on the East Med project plan.

As for the subsea electricity grid interconnection, Cyprus and Israel have pushed for its development to end their energy isolation. The European Commission has already approved funding worth 657 million euros for the prospective project’s section to run from Greece to Cyprus.

Greek prime minister Kyriakos Mitsotakis and energy minister Kostas Skrekas will be involved in two key meetings in Athens today, to focus on energy matters as a result of Russia’s war on Ukraine, with Israel’s alternate prime minister and foreign affairs minister Yair Lapid, as well as US under secretary of state for political affairs Victoria Nuland.

 

East Med regains attention as EU reshapes gas strategy

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The energy crisis, skyrocketing natural gas prices, and the EU’s new energy policy, aiming to end the continent’s reliance on Russian gas as soon as possible, are developments creating bigger prospects for the East Med pipeline, whose development could upgrade Greece’s role in the energy sector as well as geopolitically.

Importantly, higher gas prices have boosted the feasibility of the East Med pipeline project, a prospective 2,000-km pipeline planned to carry natural gas to Europe via Greece, Cyprus, Israel and Italy, as was supported yesterday by Edison CEO Nicola Monti.

The US withdrew its support for the project in January, citing technical and commercial sustainability concerns. Many analysts have forecast gas price levels will remain elevated for an extended period, which could make East Med a profitable investment for companies that construct and operate the pipeline.

Earlier this week, the European Commission announced its ambitious Repower EU roadmap, prioritizing the search for alternative natural gas sources and supply routes as a means of ending the continent’s reliance on Russian gas.

East Mediterranean gas deposits are well positioned, close to European markets. It remains unclear as to whether it would be more beneficial to transport these gas quantities in the form of LNG or via the East Med pipeline.

Given the bolstered bargaining power of gas producers and LNG exporters, the EU could be better off pursuing a pipeline solution. Also, Shell’s forecast of an LNG shortage in international markets from 2025 onwards should be kept in mind.

Energean set for Israeli license drills, anticipating 110 bcm, exports to EU

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Energean is preparing to conduct drilling operations at five Israeli EEZ offshore licenses secured by the company through a tender in 2017 and anticipates natural gas deposits of 110 billion cubic meters to serve exports to the EU, now looking for ways to end its reliance on Russian natural gas.

According to sources, Energean plans to begin its drilling effort within the next few days, at Block 12, before following up with drilling at Block 21 and Block 23.

Energean is also planning a follow-up confirmation drill at Karish and development at Karish North.

Energean plans to export, beyond Israel, natural gas extracted from all but one of the five aforementioned licenses, Karish.

Energean has already signed an agreement with Egypt’s EGAS for gas to reach the country via pipeline and, from there, via two terminals, be made available for export, including to Europe.

 

Halliburton also joins Energean for Israel drilling, beginning 1Q in ‘22

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Two of the world’s biggest companies, in their respective fields, will participate in Energean’s new drilling program for Israel, scheduled to begin in the first quarter of 2022, an effort through which the company hopes to discover hydrocarbons the equivalent of one billion barrels of oil, primarily as natural gas.

American multinational Halliburton, one of the world’s biggest oil field service companies, has announced an agreement with Energean for three to five drilling procedures offshore Israel, following four drilling efforts completed in 2019 on behalf of Energean in the area, which led to the discovery of the Karish North gas field, set to begin production in 2023, one year after production at Karish, the main field.

Energean has already selected another major global player, Stena Drilling, for the supply of drilling equipment.

According to official announcements, confirmed drilling procedures to be completed in 2022 are: 1) Karish North, containing 33 billion cubic meters of natural gas and 31 billion barrels of certified liquid hydrocarbon (2P) stocks, with first gas production set for the second half of 2023; 2) Karish Main-04, to seek additional hydrocarbon quantities at the main Karish field, estimated at an equivalent of 166 million barrels of oil; 3) at Block 12, for an exploratory drill dubbed Athena, between the Karish and Tanin fields, aiming for 20 billion cubic meters of natural gas and a further 4 million barrels of liquid hydrocarbons.

 

Energean signs contract with Stena for drilling effort, offshore Israel

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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.”