Energean Seeking East Mediterranean Collaboration & Interconnectivity

Q: Energean has a strong East Mediterranean footprint with producing assets in Israel and Egypt. The key asset is the Karish field offshore Israel, not forgetting the nearby Katlan development. Can you give us an update on those two projects?

A: At the moment, you’re absolutely right. It’s Karish and Karish North. Four wells producing a steady capacity of 730mn cfd, we are meeting the contractual arrangements that we have in Israel.

We do see seasonality in Israel. Peak demand is during the summer months when the capacity is not enough. The physical capacity of the [780mn cfd Energean Power] FPSO is not enough to meet the demand. Then we see lower demand periods like now where there is spare capacity on the FPSO, and we’re trying to fill those gaps with export contracts like the one that we’re talking about here to Cyprus and also to Egypt with the pipeline.

What is happening is we are developing Katlan, which is the next big project, and this is a project that will come on stream in the beginning of 2027, and it will allow us to continue operating and producing at the peak rates that the FPSO can produce. It’s not a project that will bring additional volumes over and above the 730mn cfd, but it’s a project that will allow us to extend the plateau of production for many, many more years to come.

Q: Just to clarify, any exports would come from the Katlan fields, with Karish gas all reserved for the domestic market?

A: Yes, the exports that we’re talking about to supply Cyprus and Egypt are from Katlan which has no restrictions on exports. The project is considered a part of the effort to interconnect the East Med. And this was also included in the statement that was made after the [US, Israel, Greece, Cyprus] 3+1 meeting, that interconnectivity of the Mediterranean is a key priority.

Q: Israel’s Natural Gas Authority has announced a budget and plans to study linking Israel to Cyprus with a pipeline. Does this give you more confidence about the potential for connecting the two countries? 

A: This is not just a pipeline that will bring gas from Israel to Cyprus. It’s a pipeline that could in the future bring the reverse flow and enhance security of supply of Israel depending on future gas supplies of the two countries. It’s part of having all the countries interconnecting and creating a regional market rather than local markets, which is what we’re facing today.

Q: Looking more closely at the Letter of Intent (LOI) with Cyfield to connect a 1bcm/y pipeline from the Karish FPSO to the Cyprus coast, has the current Cypriot administration given you encouragement to submit the offer after a similar offer in 2019 was rejected?

A: I think we’ve heard the minister refer publicly to the project, which means that it is on the radar. Obviously, I don’t run energy policy for Israel, or for Cyprus. I’m there to do the project if the governments are supportive. I think the situation is completely different than back in 2019. There have been two big wars that have brought security of supply to the center of attention for every government in Europe.

This was further brought into focus with recent deals signed by the Greek government and the one we have signed with ExxonMobil. It’s a clear indication that this part of the world will play a major role in the security of supply for the wider region. Hydrocarbons produced, pipelines and infrastructure installed are top priorities for the European Union and for the US. And as a result, I think the Cypriot government has an option.

In 2019 they evaluated the situation. Their position was that [focusing on the LNG import terminal] was the right thing to do for the country. Today, we’re in a different situation. They have to assess and decide.

We are talking about a supply of 0.4bcm/y. Energean sells 7.5bcm/y. The amount of time I’ve spent since 2019 to promote this project is disproportionate. And at some point, you know, I have a duty to my shareholders and to my board to sell the gas to whoever wants to buy this gas. There is a lot of demand at the moment in the East Med.

I have a certain level of patriotism being Greek and wanting to support Cyprus and Greece. But there is a limit, of course.

Q: How much do politics play a role in Energean’s decision about how and where to do business? Some comments have recently been made comparing the East Med with cross border cooperation in the North Sea. Is that a fair comparison or are we talking about completely different scenarios and jurisdictions?

A: There’s no easy place to do business. The geopolitics of the East Med are far more complex than the lack of geopolitics in the North Sea. But in the North Sea and especially in the UK, you have a different challenge, which is a continuously changing tax regime.

That creates an instability that is impossible for businesses to deal with. You’ve seen major companies exit the UK sector or the North Sea because they cannot handle the instability.

So, you know, there’s no easy place to do business in oil and gas. Every place has a challenge and different challenges. We’ve chosen this region, we understand the rocks and we understand the geopolitics. So we know how to navigate it and, as we’ve said before, we have to be committed to the countries that we do business in.

Q: Moving on to Egypt, what has been Energean’s approach since the disappointment of the Carlyle sale falling through?

A: Disappointment? Yes, I’ve said it also before. It was a deal that we accepted, and so was obviously a good deal for us. But having been through this and having seen what happened in the last year, year and a half now with the war and the need for gas in those countries, holding on to the Egyptian assets is critical for us. Holding on to European gas production in Italy is very valuable.

We signed a deal with Exxon to come into Greece’s Block 2, which borders the Italian block. We have submitted an application on the Italian side to explore the Italian side. It’s worked out very well for us.

We are continuously monitoring the market. And we’ve said it publicly – we will optimize the portfolio. We are not actively selling the business, but we’re always open to discuss, like any good business.

Q: Energean is discussing consolidating its offshore Egypt assets, has this encouraged the government to try and reduce receivables?

A: Egypt has a major problem for the industry, which is the over-dues that have increased beyond the levels that we can sustain.

Everybody recognizes that the situation is now improving. We see a clear improvement, especially after the ceasefire in Gaza. We see an improvement in the financial situation.

But in tough times you stick by your partners. So instead of doing what others did, which is to say “we will leave Egypt, if you don’t pay me, ” our choice was to work with the government of Egypt, find ways, and they understand that this is not instead of paying what is due, it is working with the government to go through the challenge and giving us what they can actually give us, which is improved terms.

This involves the merger of the concessions, renegotiation of gas prices and most importantly, the addition of the deep horizon of Abu Qir, which is not part of our concession today.

It’s sitting under our platforms and has the potential for another 3tcf sitting next to infrastructure. So very easy monetization. That’s the real prize. And we’re doing all this because we want to explore more. We believe that there’s going to be more gas to be found in Egypt.

If you do business in this part of the world, this is part of the ecosystem. You need to be comfortable with it. Otherwise, stay out of the Med and go to the North Sea where you do get paid.

Q: Looking at things from a corporate perspective and your recently announced collaboration with ExxonMobil offshore Greece. Independents often seem to make decisions faster than Majors. Is there scope for independents and majors to collaborate in the industry and in the region?

A: The straight answer is yes, but I don’t think that the majors are delaying intentionally because they are very big companies. What is happening is they are prioritizing projects that have a much bigger impact on their business.

For example, Exxon; Guyana where it is producing today 900,000 b/d, is an example of a situation where the company developed the asset very fast because it had a big impact. So, this is not about the majors being slow. They’re not prioritizing some projects because those projects are small.

Exxon in Greece not only came in and took 60% of the block, it agreed to have Energean as operator during the exploration stage. I don’t know any other case where a major would come in and they recognized that an independent is going to be faster, cheaper, more effective running around in Greece doing all the work.

I think this is a very good sign of collaboration between a major that brings the political support of the US, the funding, and an independent that brings the speed, the agility and the ability to move fast. This is the model that I think works very well.

Q: Moving back to Cyprus and looking at another US major, Chevron and the 3.5tcf Aphrodite, do you believe Energean could have developed the field by now considering its experience with Karish?  

A: Aphrodite is the same size as Karish. When you have developed a field like Karish and you’re doing exactly the same thing next door, the economies of scale in the synergies are so big that you can do it cheaper, more efficiently, not because you’re better. It’s just the fact of life that we did exactly the same project next door.

So I think Chevron is a company that I really admire because they are great in developing these mega projects. But there comes a point where they are too big for the small projects.

Q: Moving slightly beyond the East Mediterranean, you’ve recently entered and exited Morocco’s offshore following the disappointing Anchois well with Chariot. Are you looking at other potential opportunities in that region?

A: We’re looking at all the countries of West Africa. A common theme is discovered undeveloped resources that are too big for others or too small for the majors.

Again, same concept: too big for the independents, because the other characteristic here is that there is no other independent that has the credentials to show to a government. What other company has developed a deep-water field, has drilled eight deep water wells, has the track record of developing a major asset in deep waters offshore?

So we are in this sweet spot where we are not too big like the majors, but we’re big enough and bigger and more experienced than other independents. So that’s our focus. You’re right. Morocco was a disappointment. But you know, it happens. This is the nature of our business. We had a disappointment in Egypt when we drilled the Orion well.

*Interview conducted in Nicosia by East Mediterranean Editor Peter Stevenson.