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ILD Energy to begin drilling off Israel in June

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Israel Land Development (ILD) Energy will begin drilling for oil and gas in the eastern Mediterranean at the start of June and within a few months hopes to verify its estimates of large deep-sea deposits, company CEO Ohad Marani said on Thursday.

ILD Energy will be among the first exploration companies to drill off the coast of Israel, where natural gas production is set to soar in coming years following the discovery of some of the world's largest offshore reserves of the past decade.

ILD Energy leads a group that owns drilling rights at the Myra and Sara fields where an estimated 6.5 trillion cubic feet (TCF) of natural gas lies beneath the sea floor. An estimated 151 million barrels of oil could be hidden beneath the gas deposits, as well.

“We have two blocs with great potential that I very much believe in, and we hope that we will be able to announce significant discoveries very soon,” Marani, a former director-general of Israel's Finance Ministry, said in an interview.

His office in Tel Aviv overlooks the sea, but the Myra and Sara prospects are way out of view. They are about 70 and 80 kilometers away from the northern city of Haifa. But what makes them so promising is their proximity and geological similarity to two even larger, proven fields, Leviathan and Tamar.

Tamar, with reserves of 9 tcf, is set to begin production next year and can meet Israel's natural gas needs for decades. Leviathan, with 17 tcf of natural gas, was the largest offshore discovery in the world in the past decade.

All ILD Energy is waiting for now is for the drill rig to finish at Leviathan and make the 11-hour journey to its Myra field, which should happen in the first week of June, Marani said.

Though smaller in estimated size, Myra does have one advantage to Leviathan, where Texas-based Noble Energy is leading a U.S.-Israeli consortium that hopes to begin production in 2017.

“There is an interesting situation in which we will be the first in the coming period to be drilling for oil,” Marani said.

Noble had also hoped to find oil under the natural gas layer at Leviathan, but when they reached 6,500 meters, the deepest penetration ever in the region, mechanical problems forced them to suspend the drilling before reaching their target. The problems, in turn, delayed ILD Energy’s operation.

At Myra, Marani said, the oil deposits are thought to be at 5,200 meters, saving them some 2,000 meters of drilling.

“There should not be the problems with pressure and temperature that have occurred in greater depths,” he said.

Altogether, drilling should take about 70 days at Myra, and if natural gas is indeed discovered, an additional 3 weeks for a well test. Then onto Sara, where drilling would take about 20 days less. All that will cost about $200 million, he said.

And if all goes well, Marani estimated gas production could begin at the fields sometime in 2015.

ILD Energy owns 46.6 percent of each of the two licenses. Smaller shareholders include Modiin Energy, Canada's GeoGlobal Resources and Israel Petroleum Co.

In December, ILD Energy signed a deal with ENR, a subsidiary of South Korean group Daewoo Shipbuilding & Marine Engineering, to build a floating liquefied natural gas facility for Myra and Sara.

Marani described a likely scenario in which such a terminal, which has yet to be used commercially, would be stationed at sea, liquefy the gas, and load about two-thirds of the reserves onto tankers for export. The remaining third would be for Israeli consumption.

Following the drilling at Myra and Sara fields -- they have a 54 percent probability for geological success, a relatively high number -- ILD Energy is looking to expand into foreign waters.

t was recently awarded licenses to explore in three blocs in the economic waters of Albania and is competing in the latest licensing round in Cyprus, Marani said.