Greece's Energean raises $1.27 billion for Israeli gas fields

By Paul Tugwell on 3/5/2018

ATHENS (Bloomberg) -- Energean Oil & Gas, Greece’s only energy explorer and producer, said it signed a financing agreement with Morgan Stanley and other banks for $1.27 billion to finance development of two natural gas fields off the coast of Israel.

Natixis SA, Bank Hapoalim and Societe Generale are also part of the deal, with first gas from Israel’s Karish field expected in early 2021, Energean said Monday in an emailed statement. The Athens-based producer may export surplus gas from Karish and a second deposit, Tanin, that it can’t sell in Israel, using planned or existing pipelines in the eastern Mediterranean region, Chief Executive Officer Mathios Rigas said by phone from London.

“The agreement is a big milestone,” Rigas said. “We are rapidly advancing the Karish and Tanin development.”

The race to develop offshore energy resources in the eastern Mediterranean has accelerated since Israel discovered the Leviathan and Tamar gas fields. Egypt is developing the giant Zohr field, with help from Italy’s Eni SpA, while Cyprus plans to produce from at least two gas deposits and Lebanon is seeking undersea reservoirs of its own. Together, the finds position the region as a potential gas-producing hub on Europe’s doorstep.

Supply Commitment

Karish and Tanin hold 2.4 Tcf of contingent gas and the same amount of potential reserves, or unrisked prospective resources, with a 70% chance of discovery, Rigas said. Energean has committed to supply about 4.2 Bcmg/year to a dozen companies in Israel, and any gas it produces above that level may be exported, “depending on commercial terms, ” he said.

Energean is also trying to raise about $500 million to develop Karish and Tanin though a listing on the London Stock Exchange and is considering a secondary listing on the Tel Aviv Stock Exchange, Rigas said. The targeted amount from the IPO is “realistic,” but Energean will use a roadshow that started Monday in London to gauge investor appetite, he said. Pricing, admission to trading and the start of trading are expected March 16, according to a pricing list seen by Bloomberg.

“The equity story for Energean is that we’re an international player with assets spread across the eastern Mediterranean and there’s no other independent listed company that gives investors access to the energy story in the region,” Rigas said. Energean Israel is the operator at both Karish and Tanin, with a 100% working interest at both, according to its website.

Export Routes

A $15 billion deal between Noble Energy Inc. and Delek Drilling-LP to export gas from Israel to Egypt opens an opportunity for more shipments of Israeli gas, Rigas said. Other possible routes are a planned pipeline that will link the Aphrodite field in offshore Cyprus to one of Egypt’s LNG terminals, as well as the eastern Mediterranean pipeline project that would bring gas to Europe from offshore fields in the Mediterranean, he said.

A new law in Egypt allows private companies to import gas and re-export it through the country’s LNG facilities. The area from Cyprus to Lebanon and Egypt may contain additional gas riches, and countries in the region are eager to develop export plans. The U.S. Geological Survey estimates the area could hold more than 340 Tcfg, more than U.S. proven reserves.

The eastern Mediterranean is fast becoming a gas hub with lots of infrastructure projects and likely further discoveries, Rigas said. Energean also announced Monday a $1.36 billion contract with TechnipFMC for construction of a floating production storage facility with output capacity of 8 Bcmg/year.

It will be the first such facility to operate in the eastern Mediterranean and it potentially will allow Energean to deliver more gas in the region, Rigas said.

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