Energean seeks to prioritize Olympus gas field over Tanin

Energean (LSE: ENOG; TASE: ENOG) this morning first published its plans for the Olympus natural gas reservoir, which lies between the Karish and Tanin reservoirs. Subject to the approval of the Ministry of National Infrastructure, Energy and Water Resources, the company wants to prioritize the development of Olympus over Tanin, by linking it to the Karish platform, for considerations of efficiency and optimal use of its gas resources.

Besides, the advantage of Production from Olympus is that this does not involve paying royalties to franchise vendors, unlike in the case of Karish and Tannen, which were purchased from Delek Drilling (now NewMed Energy). The other disadvantage it solves for Energean is that Tanin is subject to export restrictions as the export rights to the Leviathan tank were transferred as part of the sale.

Olympus is located in Block 12, between Karish and Tanin. The natural gas that will be produced from it, according to the plan, will be used to fulfill existing sales contracts in the domestic market (100 billion cubic meters over 15 years), while the rest can be exported to Egypt (and through liquefaction facilities in Egypt to global markets) and Jordan, using existing infrastructure.

The company says that if the proper infrastructure is built, there may also be exports to Cyprus. However, when there is still no agreement between Israel and Cyprus on the status of the Aphrodite-Ishai field, it is doubtful whether this will happen in the near future.

Switching from the Tannen reservoir to Olympus would not cause a shortage, quite the opposite: the Tannen reservoir is estimated to hold 31 billion cubic meters of gas, while Olympus is almost twice as large, at 58 billion cubic meters.

At the same time, Energean reported first-quarter revenue of $288 million and pre-tax operating profit of $161.2 million, up 69% and 81%, respectively, compared to the first quarter of 2022. After starting production from Karish, Co. Energy. Trading volume increased by 161% compared to the same quarter.

Energean CEO Mathios Rigas said: “We are increasing production from the Karish field and have seen four months of solid gas and liquids production in Israel, with improved Energean Power FPSO operations. Israel gas contracts have moved to commercial mode and our buyers are increasing hirings. Energean expects this General provision of a large proportion of Israel’s demand for gas.

“This is why we are moving quickly to develop the resources of the newly discovered region of Olympus, as efficiently as possible. With limited additional capital outlays, the initial development concept is in line with our stated commitment to remain capital disciplined with no royalty payments to the seller or export restrictions. This strategy will create sustainable value for all of our stakeholders and allow us to maintain and grow our stated, industry-leading dividend policy.

“We continue to focus on our stated Net Zero path through continued reductions in our carbon intensity. We are and will remain a responsible producer of hydrocarbons. We are committed to being the best version of Energean we can be: providing safe and reliable energy supplies, supporting our communities and ensuring the transition.”

Energean’s share price is down 7.5% on the Tel Aviv Stock Exchange this morning.

Published by Globes, Israel business news – en.globes.co.il – on May 18, 2023.

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