Greek Firm to Buy Drilling Rights in Two Israeli Offshore Sites for $148 Million

Avi Bar-Eli
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A growing share of Israel's electricity is produced from natural gas from the Tamar gas field off the Mediterranean coast. Credit: Albatross Aerial Perspective
Avi Bar-Eli

Two drilling rights in the smaller natural gas sites off Israel’s Mediterranean coast, known as Karish and Tanin, are due to be sold to Greek buyers by the Delek Group.

The sale raises the prospect of competition with the monopoly consortium controlling the country’s two largest offshore fields – Tamar, which is in production, and the much larger Leviathan field, which is not yet producing natural gas. But the new situation also raises the specter over the future development of Karish and Tanin. Delek and Houston-based Noble Energy are the major partners in Tamar and Leviathan.

TheMarker has learned that the Delek Group, whose controlling shareholder is Yitzkak Tshuva, has signed an agreement to sell its interest in Karish and Tanin to a Greek company, Energean. Delek preferred the Greek firm to the Italian-French drilling company Edison and over Coleridge Capital, a company owned by American Jewish corporate magnate Larry Mizel. Any such sale is still subject to the approval of the boards of directors of the two sides and of regulatory authorities in Israel.

Energean is a privately owned company that has been in operation for 35 years and is currently Greece’s only drilling operator. Its operations are mostly in the Aegean Sea around Greece and in shallow water. Most recently the company has begun to branch out into areas beyond Greek economic waters, acquiring exploration rights in northern Egypt and Montenegro. Two years ago it also made a failed attempt to enter the Israeli market as the drilling operator at the offshore Sara and Myra sites.

In its newest Israeli venture, Energean is expected to hook up with investors. In the past, the name of Israeli businessman Beny Steinmetz was raised as someone interested in getting on board the Karish-Tanin project. Energean has been required by the Israeli National Infrastructure, Energy and Water Ministry to demonstrate that it has expertise in deep-water drilling. As far as is known, the company has not yet secured the ministry’s confirmation in this regard.

If the agreement is reached, Energean is expected to pay Delek a down payment of $40 million in cash and an additional $108 million in several payments. Delek would also be entitled to a 9% royalty on the sale of gas from the site, once it is in production.

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