UK firm greenlights $1.2 billion gas project offshore Israel

With a 30-year production license in hand, London-based oil and gas player Energean has made a final investment decision (FID) for a phased development off the coast of Israel, which entails a string of gas discoveries that will be tied back to an existing floating production, storage, and offloading (FPSO) vessel.

Following a multi-well East Mediterranean exploration drilling campaign in 2022, a collection of discoveries came to light, adjacent to Energean’s Karish and Tanin fields, which were originally called the Olympus Area and were formally approved by the Israeli government as the Katlan (Orca) reservoirs in May 2023. Afterward, a field development plan for the Katlan/Tanin area was approved in December 2023.

As the Israeli Ministry of Energy and Infrastructure has granted the associated 30-year lease for the Katlan area, including a 20-year extension option, Energean has taken the FID for this project, which will be developed in a phased approach through a subsea tie-back to the existing FPSO Energean Power.

The firm started production from the Karish field offshore Israel in October 2022, after the FPSO Energean Power crossed the Suez Canal, as the first vessel of its type to do so, and reached the waters offshore Israel in early June 2022. 

With the first gas slated for H1 2027, the Katlan project will extend the production plateau from the FPSO with volumes that do not incur seller royalties or carry export restrictions, underpinning the UK firm’s existing gas sales agreements alongside target international markets.

Located in water depths of up to 1,800 meters, Phase 1 encompasses Athena, Zeus, Hera, and Apollo discoveries with 229 million barrels of oil equivalent (mmboe), including 35 billion cubic meters (bcm) of gas. Israel has also ratified the Hermes discovery in the newly named Drakon area in Block 31, which was made as part of the drilling campaign in 2022.

Mathios Rigas, Chief Executive Officer of Energean, commented: “This decision marks yet another positive milestone on Energean’s growth journey. The decision to move ahead with Katlan will not surprise anyone that knows our successful track record, given our commitment to the swift development and production of gas assets.

“We are pleased that the Ministry has officially granted the 30-year lease for Katlan and confirmed our 2022 Hermes discovery, which de-risked the nearby accumulations and represents attractive potential in the newly named Drakon area (Block 31).”

TechnipFMC is in charge of the integrated engineering, procurement, construction, and installation (iEPCI)contract for the subsea scope, encompassing four-well-slot tie-back capacity to a single large 30-meter production line that has the potential to be used by future Katlan area phases.

With the wider Katlan area containing an additional 223 mmboe, entailing 34 bcm of gas, of prospective volumes across the other accumulations, seen as substantially de-risked, the operator plans to develop them in further phases. This requires a shorter pipeline connecting to the Phase 1 pipeline and will benefit from the Phase 1 FPSO upgrades and investment.

Energean highlights that the capital expenditure, which is expected to be approximately $1.2 billion, including the subsea infrastructure, an upgrade of the FPSO topsides related to MEG treatment, injection, and storage – positioned to reap the benefits of all future subsea tie-back developments – and, drilling the first two production wells of the development, Athena and Zeus with 170 mmboe, containing 26 bcm of gas, of 2P reserves.

“By developing Katlan, we will unlock further value in the Israeli subsurface that will provide additional energy security and drive sustainable development, both in Israel and the broader region,” underlined Rigas.

The FPSO Energean Power’s initial capacity was up to 6.5 bcm/yr, thus, steps were taken to enable the FPSO and the sales gas pipeline to reach the ultimate capacity of 8 bcm/yr. To this end, Energean installed a second oil train and gas export riser and achieved the first gas from Karish North, debottlenecking FPSO capacity to 8 bcm/yr.

Aside from submitting a formal application for a CO2 storage license in Greece, the UK player took steps to sell its assets in Egypt, Italy, and Croatia to pursue gas-weighted portfolio growth in the Mediterranean and the wider Europe, Middle East, and Africa (EMEA) region.

Energean is working on expanding its footprint in the Mediterranean region. To this end, the firm revealed a new country entry at the end of 2023, thanks to partnership agreements to take over the operatorship helm at two Moroccan offshore licenses from Chariot.