Energean Oil & Gas, the ambitious privately-owned Greek independent, is set to issue bid documents to work-hungry shipyards this summer for delivery of a $500 million, newbuild floating production, storage and offloading vessel destined for its $1.3 billion Karish gas and condensate project off Israel.

The FPSO will need to be on location in 2020 when Energean is due to start piping gas to customers in Israel, while liquids from Karish will be stripped out and sent to markets by shuttle tankers.

Energean chief executive Mathios Rigas told Upsgream that the sooner invitations to tender (ITT) are issued, the better it will be for his company.

“I think we will be looking to go to the market probably in the summer, towards the start of the third quarter. If we are able to contract yards soon we will get a lot better prices rather than waiting,” Rigas said.

One or more contracts would be awarded ahead of a final investment decision targeted for the end of 2017.

Commenting on which yards will receive ITTs, he said: “It could be South Korea; it could be China; it could be Europe; it could be a number of different places. It’s going to be a competitive process.” Energean contacted yards about availability earlier this year and, according to contracting sources, has now started a pre-qualification process ahead of bids emerging in June or July.

The operator appears to favour having the FPSO hull and deck built at a single yard although Rigas said “we haven’t ruled out them being built in two yards”.

Which yard or yards are chosen will depend on a number of factors, explained Rigas.

“It’s going to be a combination of technical capability, execution speed and any financial support that would come from the local Export Credit Agency (ECA).”

Energean is committing to long-term gas sales contracts that start in 2020 so Rigas is adamant the FPSO must be delivered on time — and on budget — to meet this deadline.

He said the involvement of ECAs will play a major role in the yard selection process “whether it’s China, Korea or Europe”, adding that European ECAs “are very strong these days and have a lot of appetite for doing business”.

Broadly discussing how Energean plans to fund the Karish development, Rigas said: “There’s a lot of liquidity for offshore projects in Israel. We have seen that with the funding for Leviathan (Noble Energy’s huge gas development), but ECAs are a main source for funding projects of this nature.”

The FPSO size will be determined by the volume of gas Energean sends to Israeli markets.

US dollar denominated, 15-20 year gas sales deals could be signed, underpinning demand for at least 3 billion cubic metres per annum of gas, perhaps doubling in future.

Under this demand scenario, the spread-moored floater would handle between 200 million and 300 million cubic feet per day of gas.

In addition, it will have to offload between 5000 and 6000 barrels per day of associated liquids and store close to 1 million barrels of liquids.

This oil could potentially be sold to BP — already a buyer of Energean’s Prinos basin production in Greece — although the company will also evaluate other buyers and local refineries.

Rigas said a newbuild FPSO is preferred partly because it will have to remain on location for 25 to 30 years, the duration of the production licence for Karish and Energean’s nearby Tanin gas field, which will be developed as a subsea tieback to the floater. Deploying an FPSO also avoids the need for gas infrastructure to be installed on the coast of northern Israel, which locals have traditionally objected to very strongly.

Gas from the FPSO will be sent via a 90-kilometre pipeline to a landfall at Dor.

“There is just a shore crossing for the pipeline at Dor beach,” said Rigas, adding that the adjacent land is designated for this type of activity, with a pipeline from Noble’s Leviathan field also set to make landfall there.

While FPSO lease contractors have been excluded from the vessel provision process, they could yet work for Energean, as Rigas explained.

“We are very comfortable with operation of marine assets... but we may decide to bring in an experienced FPSO contractor for a few years before handing over to the local operations team,” he said.

The FPSO could in future act as a deep-water hub for third-party gas.

Karish and Tanin are 100%-controlled by Energean and hold estimated recoverable reserves of 2.5 trillion cubic feet of gas and 40 million barrels of liquids.

* Changes were made to the story to clarify that Energean aims to sign 15-20 year gas sales deals and not 15-20 gas sales deals


About Energean Oil & Gas

Energean is a leading independent E&P company focused on the Eastern Mediterranean region where it holds eight E&P licenses, encompassing Greece, the Adriatic, offshore Israel and onshore North Africa.

It is the only oil and gas producer in Greece with a 35-year track record of operating offshore and onshore assets in environmentally sensitive areas and employs more than 480 oil and gas professionals.

Energean has reserves of 40 million barrels (2P) in the Prinos Licence, offshore North Eastern Greece, as well as 2.4 Tcf of natural gas (2C) at the Karish and Tanin fields, offshore Israel.

The Company has planned to submit to the Israeli Government an FDP for the Karish and Tanin fields by mid-2017, aiming to use an FPSO and produce gas in 2020.

The Company is pursuing an ongoing investment and development programme to increase production from the Prinos and North Prinos Oil Fields and develop the Epsilon Oil Field. The Company has secured a 25-year exploitation license for the West Katakolo offshore block in Western Greece with first oil expected in 2019/20, which will represent the first production of oil or gas in the west of country.

The Company also has significant exploration potential in the licenses held in Western Greece, Montenegro and Egypt, which provide the basis for future organic growth.