Energean eyes next-level growth in east Mediterranean

The eastern Mediterranean gas producer mainly owes its position to Israel, but that exposure could also be its Achilles heel, writes Aydin Calik

Greek independent Energean has become a symbol of the east Mediterranean's prospectivity. Five years ago its sole producing asset was a declining oil field in the Aegean Sea pumping just over 3,000 b/d. Today, the London-listed firm is a key player in the region, aiming to boost its production to 200,000 b/d of oil equivalent (boe/d) in the near term from 160,000 boe/d at present.

The gas-focused firm — with its key assets spread across Israel, Egypt and Italy — could look to go further, chief executive Mathios Rigas tells Argus. "How do we get from 200,000 boe/d to the next level, which is 300,000-400,000 boe/d?" Rigas says, pointing to Energean's entry to Morocco and its plans to develop the country's Anchois discovery. He also has high hopes for a wildcat well — Orion-1X — currently being drilled in Egypt with partner Italian firm Eni.

Energean is banking on the eastern Mediterranean's growing gas demand, and is among several firms hoping to further unlock the region's gas potential. Major oil and gas companies have expanded their footprint in the eastern Mediterranean over the past decade as part of a strategic shift towards gas to navigate the energy transition. Israel forms the centrepiece of Energean's production portfolio and will drive much of its growth. The firm this week announced first gas from its Karish North project, which aims to boost the Karish field's capacity to 8bn m³/yr from 6.5bn m³/yr. Further ahead, Energean is eyeing a phased development of the Katlan and Tanin structures, with combined reserves of 2.2 trillion ft³ (62.3bn m³).

But while Israel is crucial to the company's present and future, it could prove its Achilles heel. The conflict between Israel and Gaza-based Hamas remains a key threat to the region's energy infrastructure and development plans. Unlike Chevron, which had to briefly halt output from its 11.4bn m³/yr Tamar field in Israel when the conflict started, Energean's gas production has not been cut.

The Karish field "is a strategic asset. It is protected by Israel because it produces a lot of gas for the local market and electricity market of Israel", Rigas says. But the security situation is preventing Energean from installing a second oil train at Karish intended to almost double its associated liquids capacity to 32,000 b/d. As long as fighting rages nearby, Karish's infrastructure will be at risk.

Beyond Israel, much of Energean's growth came from its purchase of Italian firm Edison's upstream assets in late 2020. This gave it a 40pc stake in Eni's 27,000 boe/d (1.5bn m³/yr) Cassiopea gas project in Italy due on line this summer. The company also gained acreage in Egypt that last year handed it 25,000 boe/d. But like other firms, Energean is owed large sums by cash-strapped Cairo for its output, with net receivables of $149mn at the end of 2023 unlikely to appear soon.

Bigger and better

Further inorganic growth could be around the corner. "We have our eyes on any new project focused on gas in the wider Mediterranean," Rigas says. But with the industry erring towards consolidation — as shown by Eni buying gas-focused producer Neptune Energy and the merger between London-listed — Energean itself could be an attractive prospect.

BP and Abu Dhabi's Adnoc are eyeing half of Israel's NewMed Energy, which has a key stake in the country's 22.9 trillion ft³ Leviathan field. "Bigger is better," Rigas admits. "Access to capital is extremely challenging. The bigger you are, the better the balance sheets, [the] easier [it is] to raise capital in public markets."

If governments in the region want to help develop their resources, they need to be quicker in awarding licences and keep fiscal terms stable, Rigas says. He slams upstream windfall taxes imposed in Italy over the past two years. "We need stability and a very clear path, because this is a long-term business."

Energean production*