Energean seen exporting Israeli gas to Cyprus

Offshore Israeli gas rig Photo: IDF Spokesman

The company is waiting for approval for a pipeline to take gas to Cyprus from the Karish and Tanin gas reservoirs.

The Reuters news agency reported last week said that another export channel for Israeli natural gas was likely to be opened soon. Greek company Energean, which owns the Karish and Tanin gas reservoirs, is waiting for the go-ahead from Cyprus to build a gas pipeline from its floating production storage and offloading (FPSO) platform to Cyprus. The quantity to be supplied is fairly small - 0.5-1 BCM per year, less than what Israel is exporting to Jordan. If the deal goes through, however, it will be very important for the Israeli gas sector because it will open up another potential market.

Reuters said that the company was now waiting for official approval to build the pipeline. Energean CEO Mathios Rigas told Reuters, "We submitted a proposal to sell gas from the FPSO (floating production storage and offloading) facility to Cyprus."

Sources close to Energean told "Globes" today that the price in the proposal was around $6 per BTU, about the same price as in the contract for exporting gas from the Tamar and Leviathan reservoirs to Egyptian company Dolphinus Holdings.

The potential for exporting gas to Cyprus, however is questionable. The distance from the FPSO platform to the gas reception station on the southern coast of Cyprus is 200 kilometers. Since the quantity of gas involved is small, the economic viability of building an undersea pipeline in deep water, which is very expensive, is dubious.

Another question worth asking is where the gas will come from. The Karish and Tanin reservoirs jointly contain 67 BCM of gas, all of which is designated for the Israeli market, mainly for private electricity producers. Sources close to the company say that it is possible that some of the options in these contracts will not be exercised and that the quantity of gas is small in any case. Furthermore, the company believes that the gas in Karish and Tanin is potentially double what has been reported - something that has yet to be proven.

"Globes" reported two weeks ago that Energean had begun drilling in Israeli economic waters and that the first exploratory drilling would take place in the Karish North block. Energean also announced that it was considering additional drilling in Karish East and in Block 12, in which the company won the Ministry of National Infrastructure, Energy, and Water Resources exploration licenses tender more than six months ago. The company said that the goal of the exploratory drilling in Karish was "to utilize all of the existing resources" in the prospect.

The Cypriot economy does not currently consume natural gas at all, even though the still undeveloped Aphrodite reservoir was discovered in Cypriot waters eight years ago. Tests conducted at the discovery site show that the reservoir contains 100 BCM of gas, about the same as the Karish and Tanin reservoirs and a third of the amount of gas in the Tamar reservoir.

The natural gas in the reservoir could supply Cyprus's needs for many years, but has remained under the sea. In the absence of gas, Cypriots are being forced to generate electricity using diesel fuel and fuel oil, which are expensive and polluting. The electricity rate in Cyprus is NIS 0.90 per kilowatt-hour, almost double the Israeli rate.

Published by Globes [online], Israel business news - www.globes-online.com - on July 9, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Offshore Israeli gas rig Photo: IDF Spokesman
Offshore Israeli gas rig Photo: IDF Spokesman
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