Energean takes on $170M offshore Israel gas exploration plan

Yaacov Benmeleh February 11, 2021

(Bloomberg) --Energean will invest about $170 million next year in drilling as many as four new wells in Israeli waters as the company seeks to ramp up production for the domestic market.

The London-based company sees potential to find about 110 billion cubic meters of gas that it could sell over the next 10-20 years, Chief Executive Officer Mathios Rigas said in an interview. That would double Energean’s current reserves in Israel.

With a growing population and an economy shifting more toward natural gas, Israeli demand for the fuel grew to 11.3 billion cubic meters in 2019 and is expected to double next decade. Consumption dropped at the start of the pandemic, but economists expect a rebound now that Israel is rapidly vaccinating its population and gradually lifting restrictions on the economy.

Energean has locked up more than 90% of its current annual capacity of 8 billion cubic meters in the Karish and Tanin gas fields to Israeli contracts, and is therefore looking for more gas to compete for future deals, Rigas said.

“We see there is more market share for us,” Rigas said.

Energean will not need to raise funds for the new wells, he said. The company took out a $700 million loan last year and expects about $600 million in annual cash flow from the sale of oil -- on top of the gas sales -- once production starts, Rigas said.

The company still expects gas to start flowing in December unless Covid-19 restrictions delay work by another month or two, he said. The floating production storage and offloading unit is 93% built, and should set sail from Singapore for Israel in the fall, he said.

Shares in Israeli gas companies jumped on Wednesday amid speculation that Energean gas deliveries might be delayed further, opening the possibility for competitors to divert sales from the company. All contracts have force majeure protection, and any customer that did intend to break their deal would risk paying a much higher price in the open market after oil prices recovered, Rigas said.

“This company will not be pushed by what stupid investors believe from market rumors,” he said.

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