Israel to offer 19 blocks for oil & gas exploration in second offshore bid round

Israel will offer 19 offshore blocks as part of its second offshore bid round to grant exploration licenses for natural gas and oil in Israel’s economic waters in the Eastern Mediterranean.

Status of gas fields discovered offshore Israel; Source: Israel’s Ministry of Energy

The upcoming bid round is pursuant to an earlier round which began two years ago and granted six licenses. Some of these are expected to start drilling in the upcoming months, Israel’s Ministry of Energy said on Sunday.

Israel’s Energy Minister, Dr. Yuval Steinitz,  said: “It is my pleasure to announce the launch of our new bid round for exploration and production of natural gas reservoirs in the East Mediterranean. This bid is intended to continue the development of the natural gas market in Israel, increase competition by the entry of new international energy companies and broaden Israel’s energy security. These efforts correlate with the progress of the subsea pipeline between Israel and Europe, which will allow us to export the gas to Greece, Italy and the rest of Europe.”

19 blocks in 5 zones

In the new bid round, licenses for 19 blocks will be issued in five zones. Each block measures up to 400 sq km and each zone, consisting of multiple blocks, can be as large as 1600 sq km. According to the ministry, the decision to market the blocks in zones is to allow better correlation between the exploration areas and subsurface geological structures that potentially contain oil and gas reservoirs. Holding larger interests will allow efficient subsurface evaluation and will increase the attractiveness of the zones to investors.

The zones are located in the southern extent of Israel’s economic waters, an area which has been previously licensed in part and had previous seismic research and limited exploration activity. The existing research indicates the potential for the discovery of hydrocarbons in the bid round area, the government said.

The basic participation guarantee amount for the first block licensed in a zone will be $2.5 million. Every additional block in the same zone will require another $0.5 million guarantee. The maximum guarantee required to receive 4 consecutive blocks (zone) will be $4 million.
In addition, before drilling, the licensee will be required to place an additional guarantee, in the sum of $5 million.

 

Three-year work period

 

An exploration license will be granted for an initial period of three years. During this period, the licensees will follow through with the work plan they have committed to, which constitutes exploration of the whole area granted in the license. After completing the work plan, the licensee can request a license extension for two years, with the condition that they submit a work plan that includes drilling in at least one of the licenses in the zone.

After drilling and completing all the work plans, the license term will be able to be extended by two additional years, to a maximum of seven years, with the condition of a commitment to drill in every license which was granted by the end of the license term.

 

Ensuring diversity of bidders 

 

To broaden the participation of as many new bidders as possible in the bid round, the Israeli Energy Ministry has decided to limit the number of licenses granted to any one party to 8 licenses.

In addition, it has been decided that any licensee holding over 20% of a producing oil lease – will not be able to participate in the current bid round. In addition, a group that does not hold current licenses will be preferred in the current bid round in order to increase diversity of license holders.

Licenses will only be granted in areas approximately four miles or greater from the shoreline.

The government said that the bid round details will be published in the upcoming weeks, submissions will be possible by June 2019, and the announcement of the bid winners will take place in July 2019.

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