Energean to Raise Cash for Karish

Greek upstream company Energean is preparing to raise capital in London to develop its two small gas fields Karish and Tanin offshore Israel. Energean bought the rights for those assets last year from Delek Drilling for $48mn and a conditional payment of $108mn in ten annual instalments if a positive final investment decision (FID) is taken. That is expected by the end of the year. So far, Energean has accumulated MOUs and sales agreement for 3bn m³, the declared threshold for an FID.

Karish and Tanin's first phase development costs are estimated at $1.5bn. Energean and its partner Kerogen Capital will raise $400mn in London and $1bn from Israeli institutional investors, according to The Marker, an Israeli website.

In the past Delek group raised easily billions of dollars in the Israeli financial markets towards the development of Tamar and Leviathan. However, sentiments in the market towards investments in energy might have changed now. In the last three months, Delek Drilling lost a fifth of its market value on fears that gas prices in the domestic market might come down. The company is also expecting a class action against it.

Energean is offering its customers prices that are a fifth or more lower than the prices the monopoly charges its customers.

Energean is also considering financing the project by banks loans since it is going to be a project financing. When Energean announces FID by the end of the year, it is expected to have PSAs for over 3 bn m³ of gas. That is opposed to Leviathan Partnership, which actually has no firm PSAs. Its main customer, the Jordanian National Power Company (Nepco) is not the most reliable customer because of the geopolitical situation in the Middle East. Jordan is able to import LNG and in July tendered for deliveries for next year.

Kerogen Capital joined Energean Israel in February this year, buying into half the rights in Karish and Tanin for $50mn, financing front-end engineering and design and the field development plan. However, Kerogen's importance to the project is its presence in the London capital markets. Energean is operating in Israel through Energean Israel.

Ya'acov Zalel