AN AERIAL SHOT of Prinos, a Greek oil reservoir that belongs to the energy firm Energean..
(photo credit: Courtesy)
After receiving Israeli government approval to purchase the Karish and Tanin reservoirs, the Athens-based Energean Oil & Gas expressed its intentions to advance development and see gas flowing by 2020.
On Tuesday, the Israel Petroleum Council approved the $148 million deal, initially cemented in mid-August between the Greek company and Delek Group subsidiaries, Delek Drilling and Avner Oil Exploration, that currently hold the reservoirs. As per the agreement, Energean will not only receive the rights to the fields, but will pay royalties to the Israeli firms from the sales of gas and condensate.
“The acquisition of Karish and Tanin and their development is a significant step for Energean, but it is also a big milestone for Israel in developing its gas strategy, by bringing competition in the local market,” Mathios Rigas, CEO of Energean, said on Wednesday. “Energean is committed to delivering a mutually beneficial and successful development and gas sales program as partners with the Israeli government.”
The agreement to purchase the Karish and Tanin reservoirs is the first concrete result of Israel’s contentious “gas outline” that rattled the sector for all of 2015. As part of the outline agreement, which aimed to settle disputes between the government and dominant gas companies in Israel, the firms were required to sell both of these basins.
Located in the north of Israel’s exclusive economic zone, the Karish and Tanin reservoirs jointly contain about 58.7 billion cubic meters (bcm) of gas and 14.3 million barrels of condensate in contingent resources.
In addition to these quantities are prospective resources with high chances of success, including approximately 25.6 bcm of gas and an additional 4.3 million barrels of condensate, according to the Greek and Israeli companies involved in the deal.
Contingent resources are estimates of hydrocarbons that have been discovered but have not yet reached commercial development, while prospective resources are potentially recoverable estimates that have yet to be discovered.
Now that the Petroleum Council has approved the sale of Karish and Tanin to Energean, the company stressed its intentions to move toward completing the transaction and submit a field development plan to the government within six months. With gas expected to flow from the basins by 2020, the company said development would involve an investment of around $1 billion over the next few years.
“Karish and Tanin will supply the Israeli domestic market for many years, and we are eager to press ahead with its development as soon as possible,” Rigas said.
The company will soon select its proposed contracting partners for the field’s development, he explained.
“We will also be starting negotiations with potential gas users and are confident that we can deliver competitive gas prices and services for the Israeli consumers,” Rigas added.
The transfer of the two reservoirs to Energean represents for National Infrastructure, Energy and Water Minister Yuval Steinitz, “an important step toward dismantling the gas monopoly,” as per the requirements of the country’s gas outline.
“The entrance of another player into the gas market will contribute to strengthening competition and diversity, increasing energy security in the local sector and bolstering the ability to replace the use of coal at the Hadera power plant with natural gas, for the benefit and welfare of the citizens of Israel,” Steinitz said on Tuesday.
The Karish and Tanin program will be the third field development plan to which Energean has committed for the next few years, according to the company. Programs are also being prepared for the Epsilon basin in the North Aegean Sea and West Katakolon field in the Ionian Sea – the latter of which received Greek government approval for development at the end of November. The company is also exploring in additional areas of Greece, Montenegro and Egypt.