Israel’s first crude oil exports to start from Energean project

Israel’s first-ever stream of oil exports has launched from Energean’s Karish development in the eastern Mediterranean, a landmark moment for a country once vulnerable to a lack of domestic energy supplies.

The nation’s first overseas crude shipment was loaded on Monday from the Energean Power Floating Production Storage and Offloading unit, a giant vessel that has been used to develop the Karish gasfield.

Energean’s FPSO is part of a development that has been politically controversial because of its location on a once-disputed maritime border between Israeli and Lebanese waters.

Israel in July shot down three drones believed to have been launched towards the FPSO by Lebanon’s Iran-backed Hizbollah group, prior to the project’s start-up.

But after years of indirect negotiations, a US-backed agreement was reached in October that demarcated a maritime border between the Karish gasfield and the Qana gasfield on the Lebanese side. Energean started production at Karish late last year and France’s TotalEnergies is due to begin drilling the Qana gasfield later in 2023.

The crude loading on Monday was still deemed sensitive enough to take some additional security measures, however.

The Seliger Aframax tanker, capable of carrying about 700,000 barrels of crude, was visible on satellite tracking next to the Energean Power FPSO late on Sunday evening but then turned off its tracking device. This was done as a security measure, according to one person familiar with its operation.

A firefighting vessel, the EDT Aurora, was also positioned near the tankers on Monday afternoon.

Vitol, the world’s largest independent oil trader, has a deal to offtake and market the Karish cargoes internationally, Energean said. Vitol declined to comment.

Energean, which is listed in London, has grown rapidly since being founded by Greek banker Mathios Rigas in 2007. Its shares have roughly doubled since 2019 to give it a market capitalisation of £2.2bn.

Rigas said he was happy to help Israel join “the club of international oil exporters” and said it was a “milestone” for the company.

Israel’s lack of domestic gas and oil production was a point of weakness for much of its history following its 1948 independence, with many of the world’s largest oil producers in the Middle East refusing to supply the country.

But in the past decade, multiple discoveries in the waters of the eastern Mediterranean have helped reduce Israel’s dependence on imported fossil fuels.

Israel is now self-sufficient in natural gas, which has reduced its reliance on coal and helped smooth ties with its neighbours through export agreements to Egypt and Jordan, although it still imports the majority of its crude oil.

While Karish is primarily a gasfield, the success of its associated oil production is crucial to the economics of the project for Energean, according to people familiar with the matter.

The price Energean receives for the gas it produces at Karish is lower than international prices because Israel is a relatively isolated market. But the associated oil can be shipped internationally by tanker with Energean expected to get closer to the global price for its crude, which will be known as Karish Blend.

Israel’s largest gasfield, Leviathan, which started up in 2019, also produces some associated crude oil that is sent to domestic refineries.

Energean’s oil and gas production, which includes operations in Israel, Egypt, Italy and Croatia, is expected to rise with the ramp-up of Karish from about 41,000 barrels of oil equivalent a day to 150,000 boe/d by the end of the year and 200,000 boe/d in 2024.

Israel is still largely reliant on imported crude for its 300,000 b/d refining sector, with domestic demand of about 250,000 b/d. It exports a small volume of refined oil products such as petrol and diesel, according to the US Energy Information Administration.