Energean inks $900M gas supply deal

London-listed oil and gas company Energean has signed a 19-year natural gas supply deal with Israeli power generation developer IPM Beer Tuvia, slated to start in 2024.

Energean will supply a total of 5.5 billion cubic meters (Bcm) (1.94 trillion cubic feet) of gas produced from its Karish and Tanin projects, offshore Israel, throughout the contract's life, valued at $900 million. Deliveries will range between 0.26 (9.18  billion cubic feet) and 0.38 Bcm (13.41 Bcf) per day, but IPM has the option to increase its offtake to 0.55 Bcm (19.42 Bcf)/d.

The sale and purchase agreement is contingent on results of the 2019 drilling program, which includes drilling four wells in Israel and commences with the spud of Karish North in March, targeting 36.8 Bcm (1.30 Tcf) of gas. The Karish and Tanin fields are on track to produce first gas in the first quarter of 2021.

Energean may supply IPM with limited volumes between 2021 and 2024. IPM is building a new gas-fired power plant due to come online in the second half of 2020, and gas purchased from Energean will provide part of its feedstock requirements.

“The signing of this contract ahead of results from our 2019 drilling program demonstrates not only the attractiveness of the Karish and Tanin fields, but also the strong incremental demand that we have identified for our gas. We will continue to target additional sales,” said Mathios Rigas, CEO of Energean Oil & Gas.

“Our future sales contracts will target both the growing domestic and regional export markets, delivering attractive incremental economics for all of our stakeholders,” he added.

To date, the company has secured offtake of 4.6 Bcm/y (162.38 Bcf/y) from the fields, which plan to produce 8 Bcm/y (282.4 Bcf/y). The remaining 3.4 Bcm/y (119.02 Bcf/y) spare capacity is expected to be sold in the medium term, Energean said.

Source: Kallanish Energy