Greece's Energean expects to spend up to $1.5 B on Israeli offshore gas project

JERUSALEM (Reuters) -- Greek company Energean Oil & Gas plans to build its own production system in the eastern Mediterranean at a cost of up to $1.5 billion to tap two Israeli offshore gas fields, the group's chief executive said on Wednesday.

Greece's only oil producer is also looking to bring a financial partner into the project to develop the Tanin and Karish fields which are situated in deep waters around 62 miles off Israel's coast and have combined gas reserves estimated at 2.4 trillion cubic feet.

Energean bought Karish and Tanin last August for $148 million from US-Israeli partners Delek Group and Noble Energy, who are developing two much larger fields nearby and were required by Israel to sell off other discoveries in an effort to open up the sector to competition.

Rather than piggyback off that group's infrastructure, an idea previously floated by some experts, Energean plans to lease its own floating production, storage and offloading (FPSO) vessel and build a separate pipeline to Israel.

"We are going to be a totally independent system," CEO Mathios Rigas told Reuters, adding that a combination of local and international banks will help finance the $1.3-$1.5 billion needed.

Before making a final investment decision, which is expected in December, the Israeli government must first approve the development plan and Energean needs to secure sales contracts for 3 billion cubic metres of gas per year, Rigas said.

Israel has determined that gas from Tanin and Karish must be sold domestically.

The Israeli fields are Energean's biggest assets and the company is looking to lighten the load.

"In the next three to six months maximum we will bring in a financial partner ... that will work with us to share the risk and help us develop the project," Rigas said.

He expects gas production to begin in 2020.

Reporting by Ari Rabinovitch; Editing by Greg Mahlich

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