New gas discovery for Energean off Israel

New gas discovery for Energean off Israel

Hydrocarbon exploration and production company Energean has made a commercial gas discovery in Block 12 offshore Israel, bolstering its beliefs in the potential of the newly defined Olympus Area.

Stena IceMax drillship; Source: Stena Drilling

Back in June 2021, Energean contracted a rig from Stena Drilling for its 2022 – 2023 growth drilling programme offshore Israel. The firm also booked Halliburton in September 2021 under an integrated services contract to execute the well drilling and completions.

The beginning of the drilling campaign, targeting the derisking of unrisked prospective recoverable resources of over 1 billion barrels of oil equivalent (boe), was scheduled for March 2022.

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In an update on Monday, Energean revealed that a commercial gas discovery was made within the Athena exploration well in Block 12, in the A, B and C sands. The preliminary analysis of the Athena discovery indicates that it contains recoverable gas volumes of 8 bcm (283 bcf/51 mmboe) on a standalone basis.

Mathios Rigas, Chief Executive of Energean, commented: “We are delighted to announce this new gas discovery at Athena and the potential of the wider Olympus Area. We are considering a range of strategic commercialisation options both for a standalone and wider Olympus Area development, including domestic and multiple export routes.”

The company points out that this discovery is particularly significant as it de-risks an additional 50 bcm (1.8 tcf/321 mmboe) of mean unrisked prospective resources across its Olympus Area – total 58 bcm/372mmboe including Athena – which includes not only Athena but also the undrilled prospects on Block 12 and the adjacent Tanin lease.

Energean holds 100 per cent interest in the Athena exploration well, which was drilled on Block 12, located 20 kilometres from Karish and 20 kilometres from Tanin A, in a water depth of 1,769 metres. The Stena Icemax drillship – an ice-class harsh environment dual-activity dynamically positioned drillship, capable of drilling in water depths of up to 10,000 ft – carried out the drilling operations, which took 51 days and came in below the budget of $35 million.

The Athena well is the fifth one in a row that the company drilled successfully in Israel. The well results show a gross hydrocarbon column of 156 metres was encountered in the primary target (the A, B and C sands). Energean intends to undertake additional analysis to further refine the full resource potential – including volumes contained within thinner sands between the main reservoir units – and to confirm the liquids content of the discovery.

The well has been suspended as a future production well while no commercial hydrocarbons were discovered in the deeper secondary target D sands with a 22 per cent probability of success.

The firm also informed that the Athena discovery could be commercialised in the near term via tie-back to the Energean Power FPSO, which sailed away from Singapore earlier this month. Energean believes that the tie-back would enhance the profitability of the Karish-Tanin development. The Karish project is expected to produce the first gas in the third quarter of 2022.

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Athena discovery as part of Olympus Area development

As an alternative to the tie-back solution, Energean stated that the Athena discovery could form part of a new Olympus Area development. The firm is actively pursuing development options for the commercialisation of the wider Olympus Area, such as further domestic Israeli gas sales and export options.

Furthermore, the discoveries and prospects in this area lie along the same geological trend and Athena was drilled on the same direct hydrocarbon indicator – shown in the seismic analysis – as Tanin.

When it comes to gas sales, this includes new gas sales and purchase agreements (GSPA) underpinned by the continued growth of the Israeli power market and spot sales. Energean further added that a spot contract was signed with the Israel Electric Corporation (IEC) in March 2022.

On the other hand, export options entail developing the Memorandum of Understanding (MoU) signed with the Egyptian Natural Gas Holding Company (EGAS) in December 2021 for the supply of up to 3 Bcm/yr of natural gas on average for a period of 10 years into a binding agreement along with exports to other regional and European markets via pipeline and LNG via Cyprus and/or Egypt.

Energean elaborates that the economics of gas produced and sold from Block 12 are not subject to royalties payable to the original sellers of the Karish and Tanin leases, leading to an approximate 8 per cent increase in revenue for the same volumes sold, when compared with the Karish and Tanin discoveries.

“This discovery and the broader de-risking of a number of prospects in the Olympus Area reaffirms the role of the East Mediterranean as a global gas exploration hotspot. It strengthens our commitment to provide competition and security of supply to the region, enables the optimisation of our Israel portfolio and fulfils one of our key milestones for 2022,” added Rigas.

Energean continues its drilling campaign

According to Energean, the Stena IceMAX has now moved to the Karish Main-04 appraisal well, and the top hole has already been drilled. Afterwards, the rig is expected to complete the Karish North development well.

The company further states that a decision regarding the drilling of the optional exploration wells – Hermes and/or Hercules – is expected to be made by the end of the second quarter of 2022.