Greek energy firm Energean said on Monday that it had made a “significant” discovery of between 28 and 42 billion cubic meters of natural gas at its North Karish field offshore Israel.
While the find doesn’t contribute significantly to Israel’s total known gas reserves, analysts say it will inject more competition into the domestic gas market, which is now dominated by Noble Energy of the United States and Israel’s Delek Group.
This was the first new drilling conducted in Israeli economic waters since 2013 and, as Energy Minister Yuval Steinitz noted, gas was found just a month after it began and a week ahead of schedule.
The discovery will also boost Energean’s reserves in its Karish and Tanin fields by some 50%. Karish’s reserves now amount to 45 BCM and Tanin’s are 22 BCM, so that total reserves for the two fields are now in a range of 95 to 109 BCM. That is equal to about one-third the reserves in the nearby Tamar field, Israel’s biggest field in terms of production.
Energean, traded in Tel Aviv and London, soared on the news. On the Tel Aviv Stock Exchange the shares climbed 5.8% to 40.20 shekels ($11.29).
“The bottom line is that even though the amounts were pretty much expected, it’s positive news for Energan that ensures it will meet the contractual commitments it made, contingent of course on its completing development, and will lead to more competition with respect to future contracts,” said Liran Lublin, the head of research at IBI Investment House.
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Energean plans further drilling. Stena DrillMASX, the ship hired by Energean, is now slated to return to its Karish Main reservoir to drill three development wells to a greater depth than they are at now, in hopes of finding more gas. After that, Energean has options with Stena Drilling for six more drillings.
The new discovery is located not far from the company’s floating production storage and offloading (FPSO) unit, which aims to reach a total export capacity of eight billion cubic meters per year.
“We are building the Energean Power FPSO with spare capacity, which will enable us to quickly, safely and economically develop both Karish North and future discoveries. We have already signed a contingent contract to sell 5.5 BCM of this new resource, and our strategy is now to secure the offtake for remaining volumes,” said CEO Mathios Rigas.
Energean has already presold some of the gas to independent Israeli power producer IPM Beer Tuvia in an agreement set to last 19 years and earn Energean $900 million.
Lublin noted that Energean’s announcement refers to so-called “gas in place” and that the amount it will actually be able to extract could be 25% to 35% less.
Energean, which has also has operations in Greece and the Adriatic, first embarked on business in Israel in 2016 when it acquired rights to Karish and Tanin from Noble and Delek for $140 million. Delek retrained royalties rights entitling to 7.5% of all income from the fields after deducting for the Sheshinski windfall profits tax. In addition, Energean sold a 30% stake to Kerogen Capital.
The first gas is expected to flow from the sites in early 2021.