Energean has signed two new Gas Sales and Purchase Agreements worth $2.5 bln which, combined, represent quantities of up to 1.4 bcm/yr, increasing total firm contracted gas sales from its flagship Karish project to approximately 7 bcm.
The new contracts take the Greek energy company closer to reaching maximum 8 bcm/yr capacity for its Karish FPSO.
“We are delighted to have signed these additional gas sales agreements, which increase firm gas sales to 7 bcm/yr on plateau from our flagship Karish gas project, which is on track to deliver first gas in 2H 2021,” said Energean’s CEO Mathios Rigas.
“We remain committed to continue bringing competition and security of supply to the Israeli gas market even after we fill to its maximum capacity,” he added.
The new agreements represent contracted revenues of more than $2.5 bln over the life of the contracts, but require no further capital investment beyond Karish North, upon which Energean Israel expects to take Final Investment Decision later this year.
The GSPAs have been signed at levels that are aligned with the other large, long-term contracts within Energean’s portfolio and are only subject to buyers’ lenders’ consent
The majority of the quantities are represented by a GSPA to supply gas to the Ramat Hovav Power Plant Limited Partnership and Shikun & Binui.
RH Partnership was the winning bidder in the Israel Electric Corporation Ramat Hovav tender process, the second IEC power plant in a series of five to be privatised.
The GSPA is for a term of up to 20 years and contains provisions regarding floor pricing for the main plateau period and exclusivity.
The annual contract quantity reduces after the first seven years following first gas from Karish.
The remainder of the quantities are represented by a second new GSPA that has been signed with an affiliate of the RH Partnership for the supply of gas for other existing power stations.
Gas supply will commence following first gas from Karish, achieving the plateau rate from January 2024.
The contract term is for up to 15 years and the GSPA contains provisions regarding floor pricing for the main plateau period and take-or-pay.
Energean’s near-term strategy is to secure the necessary offtake to fill the remaining 1.0 bcm/yr of spare capacity in the 8 bcm/yr Energean Power FPSO.
Energean is assessing several opportunities in both the Israeli domestic market and key export markets to meet this target, alongside reviewing further growth opportunities across the nine exploration blocks that it holds in Israel to further expand its presence in the Eastern Mediterranean.
“The new contracts we signed further strengthen our secured revenues stream, which is well-insulated against future commodity price fluctuations, and provide cash flows that will support our strategic goal of paying a sustainable dividend to our shareholders,” said Rigas.