Saudi Arabia - joining the dots

A series of blog entries exploring Saudi Arabia's role in the oil markets with a brief look at the history of the royal family and politics that dictate and influence the Kingdom's oil policy

AIM - Assets In Market

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Iran negotiations - is the end nigh?

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Yemen: The Islamic Chessboard?

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Acquisition Criteria

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Valuation Series

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Showing posts with label East Med. Show all posts
Showing posts with label East Med. Show all posts

Friday 6 July 2018

Karish and Tanin to supply Cyprus


Energean announced earlier this month that it is seeking approval to build a pipeline from its Karish and Tanin fields to the shores of Cyprus from the Cypriot government. The company has already contracted 4.2bcm p.a. from its fields with Israeli buyers and is progressing with further gas supply contracts. The Karish and Tanin project has already been sanctioned, so further supply contracts are not necessary for FID but will strengthen the commercialisation of the project. Energean’s FPSO once online will have capacity to handle c.800mmcfpd.

There are ample of buyers in the Eastern Mediterranean for gas given gas shortages and growing demand in the region. Cyprus in particular is a country keen to secure more gas as it has just put out a tender for LNG import and Floating Storage and Regasification Unit construction.

Reuters noted that Energean will bid for further supply contracts in Israeli power plants with the coal-to-gas switching initiative providing further opportunities for the company.

Wednesday 23 May 2018

Aphrodite gas: lover's quarrel


Aphrodite is owned by Noble (35% operator), Delek Drilling (30%) and Shell (35%). The field lies in Block 12, offshore Cyprus and was discovered in 2011. BG Group farmed into 35% from Noble Energy in November 2015 for USD165 million following declaration that the field was commercial in June 2015.

As reported earlier, Shell intends to use Aphrodite gas to supply ELNG, but this has now faced a new hurdle. Cyprus and Israel are arguing over the extension of the Aphrodite structure into Israeli waters. Given the importance of the gas, the regional governments are keen to avoid the dispute delaying the commercialisation of the field.

Despite its vicinity to and significantly earlier discovery than Zohr (2015), Aphrodite remains uncommercialised. In fact, its commercialisation was previously called into question given the resource was too small to justify export infrastructure. This is a recurring theme within East Med gas with export route remaining a key issue. Egyptian gas discoveries are lucky enough to have a short gas domestic market and the option to export via LNG.

Israeli gas has taken longer to get off the ground, but has reached sufficient scale to export into the region by pipeline beyond supplying its own domestic market.

Cypriot gas, and indeed Lebanon, face the challenge of a small domestic market and lack of gas export infrastructure. Cyprus has toyed with the idea of developing its own LNG terminal but currently lacks the scale of reserves required to do so.

It makes sense for Aphrodite to supply ELNG at Idku. Shell has ownership in both Aphrodite and ELNG and a direct pipeline to the plant would allow it to bypass the Egyptian gas grid. Furthermore, a direct pipeline could galvanise further exploration and development activity along the route.

ELNG is largely supplied by the West Delta Deep fields and has been operating at minimal levels since gas was diverted to the domestic grid in 2013. In 2017, it shipped 0.78 million tonnes in cargoes (vs. capacity of 7.2 mmtpa). This has meant the plant remains operational and ready to ramp up once gas is supplied. In contrast, the Damietta LNG plant has been idled and would require significant work to restart operations.

The partners of Aphrodite are now finalising the field development plan with the Cypriot government. The plan initially involves five wells with a combined output of 800mmcf/d and developed using a floating platform. Cost estimates are estimated at USD2.5 - 3.5 billion excluding the cost of any pipeline to ELNG at Idku.


Friday 23 March 2018

Double success for Energean – IPO and FID


Energean put the East Med on the map this week propelling the region into the headlines.

Energean debuted on the London Stock Exchange at the beginning of this week with its Initial Public Offering and USD460 million of new money putting the company’s market capitalisation at just under USD1 billion. The company’s flagship asset is its 70% stake in the Karish & Tanin gas fields offshore Israel which contain 2.4tcf of gas and 33mmboe of light hydrocarbon liquids. First gas is targeted for 2021. The company also has producing assets in Greece and an exploration portfolio throughout the Aegean region.

In the same week Energean reached Final Investment Decision on the Karish & Tanin development giving the green light to commence the USD1.6 biliion project. USD405 million from the IPO proceeds will be used to fund Energean’s 70% share of the project and partner Kerogen will fund its 30% stake. A USD1.275 billion bank facility will also be used to fund this ambitious project.

Energean has secured long-term gas agreements with some of the largest private power producers and industrial companies in Israel. To date it has contracted for the purchase of a total of 61bcm over a period of 16 years, at an annual rate of c.4.2bcm p.a..

The East Med has become a hot play for gas and Karish & Tanin follow in the footsteps of giant gas fields in the region including Leviathan, Zohr and Aphrodite. Energean is set to become an exciting story to follow as industry interest in the East Med grows and the demand for its gas becomes increasingly important being in the centre of short gas MENA countries and the doorstep of Europe.