This morning, Energean (LSE: ENOG; TASE: ENOG) published for the first time its plans for the Olympus natural gas reservoir, which is located between the Karish and Tanin reservoirs. Subject to approval by the Ministry of National Infrastructure, Energy and Water Resources, the company wants to prioritize development of Olympus over Tanin, by connecting it to the Karish platform, out of considerations of efficiency and optimal use of its gas resources.
Besides that, an advantage of producing from Olympus is that this does not involve payment of royalties to the sellers of the concession, unlike the case of Karish and Tanin, which were bought from Delek Drilling (now NewMed Energy). Another drawback that it solves for Energean is that Tanin is subject to export restrictions since the exporting rights were transferred to the Leviathan reservoir as part of the sale.
Olympus is 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 local market (100 BCM over 15 years), while the remainder can be exported to Egypt (and through Egypt’s liquefaction installations to global markets) and to Jordan, using existing infrastructure.
The company says that if the appropriate infrastructure is built, there could 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 Tanin reservoir to Olympus will not cause a shortage, but rather the opposite: the Tanin reservoir is estimated to contain 31 BCM of gas, while Olympus is almost double in size, at 58 BCM.
At the same time, Energean reported first quarter revenue of $288 million and a pre-tax operating profit of $161.2 million, up 69% and 81% respectively in comparison with the first quarter of 2022. Following the start of production from Karish, Energean’s production volume rose 161% in comparison with the corresponding quarter.
Energean CEO Mathios Rigas said, "We are ramping up production from the Karish field and have seen four months of solid gas and liquids production in Israel, whilst optimizing the operations of the Energean Power FPSO. Our Israeli gas contracts have moved to commercial status and our buyers are increasing nominations. This year, Energean expects to supply a significant proportion of Israel's gas demand.
"This is why we are moving quickly to develop our newly discovered Olympus Area resource, as efficiently as possible. As there is limited incremental capex, the initial development concept is in line with our stated commitment to remain capital disciplined. With no seller royalty payments or export restrictions, this strategy will create sustainable value for all our stakeholders and allow us to maintain and grow our stated sector-leading dividend policy.
"We continue to focus on our Net Zero stated path through continuous reductions in our carbon intensity. We are and will remain a responsible hydrocarbon producer. We are committed to being the best version of Energean we can be: provide a secure and reliable energy supply, support our communities and underwrite 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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