Zion Oil & Gas Newsletter February 19, 2010

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Zion Oil & Gas Newsletter February 19, 2010 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Dear Shareholder and/or Friend of Zion… On Wednesday of this week, Israel’s Channel 10 TV sent a reporting team to interview ‘Zion Oil & Gas’ and film at the Ma’anit site. I understand that a TV program on ‘Oil and Gas in Israel’ is scheduled for broadcast tonight (Friday) on Channel 10 in Israel. As I mentioned last week, Zion has been featured or mentioned in various articles in the business press recently, as ‘Oil & Gas in Israel’ continues to be a ‘hot topic’ that is attracting very great interest in Israel. Please note that there will not be a weekly update next week as both Bill Ottaviani (Zion’s President and Chief Operating Officer) and I will be in New York, presenting Zion Oil & Gas at the NASDAQ-Oppenheimer Israeli Equities Conference. ……………………………………………………… Here is this week’s operations update:

The Ma’anit-Rehoboth #2 Well As reported previously, following the rig mobilization, we are in the process of getting ready to re-enter this well to conduct production testing on several geologic intervals. As you can see in the picture above (taken on Wednesday, February 17th), the rig mast has been raised. As I write, final preparations are being made to re-enter the well, but I expect that by the time that you read this report, we will have re-entered the well and started operations. Logistical arrangements for all of our planned work activities are just about completed, as we start to receive project equipment and finalize our service schedules. In keeping with past practice, we will employ local companies when appropriate, which helps grow the petroleum industry within Israel and, as needed, we will also bring in the multinational firms that offer specialized services and equipment attuned to our particular needs. We expect to use the services of Baker-Hughes and Weatherford and, for the first time in our operations, we plan to use Schlumberger Oilfield Services. Schlumberger is a well-known and respected name within the international petroleum industry, especially noted for their capabilities in well testing operations and that is exactly the purpose we plan to use them for, at our Ma’anit-Rehoboth #2 well. In 1912, Conrad Schlumberger conceived the revolutionary idea of ‘logging’ – using electrical measurements to map subsurface rock bodies. The use of the word ‘logging’ derives from the written record by the captain of a ship in his daily log. In 1919, Marcel Schlumberger began working with his brother Conrad, in Paris and, in 1929, for the first time, they logged a well in California, USA. Fast forward 80 years and Schlumberger should soon be operating in Israel. Well operations are expected to continue for approximately two months. Of course, many factors may cause operations either to be extended or to be accelerated. You can be assured that under all eventualities, we will take appropriate action, as and when required.

The Wellhead at the Elijah #3 Well Operations at the Elijah #3 Well The Elijah #3 well was drilled to a depth of approximately 10,938 feet (3,334 meters) when the drill string became stuck within the Asher Volcanics section of the hole. After recovering a significant portion of the stuck drill pipe, progress in recovering the remainder of the pipe slowed and the decision was made to temporarily suspend drilling operations pending further analysis of the situation and to relocate the rig to the Ma’anit-Rehoboth #2 well. We are currently assessing various options that should enable us to proceed with the ‘next steps’ for this well. The Issachar-Zebulun Permit Area As reported previously, Zion and the Geophysical Institute of Israel (GII) have signed an Agreement for GII, on behalf of Zion, to acquire approximately 30 kilometers of seismic data in Zion’s Issachar-Zebulun Permit area. Pre-site assessment is scheduled to begin this month with the actual field work anticipated to occur during April and May 2010. “In your good pleasure, make Zion prosper…” Psalm 51:18 Thank you for your support of Zion, and Shalom from Israel Richard Rinberg CEO of Zion Oil & Gas, Inc. www.zionoil.com FORWARD LOOKING STATEMENTS: Statements in this communication that are not historical fact, including statements regarding Zion’s planned operations, geophysical and geological data and interpretation, anticipated attributes of geological strata being drilled, drilling efforts and locations, the presence or recoverability of hydrocarbons, timing and potential results thereof and plans contingent thereon and sufficiency of cash reserves are forward-looking statements as defined in the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on assumptions that are subject to significant known and unknown risks, uncertainties and other unpredictable factors, many of which are described in Zion’s periodic reports filed with the SEC and are beyond Zion’s control. These risks could cause Zion’s actual performance to differ materially from the results predicted by these forward-looking statements. Zion can give no assurance that the expectations reflected in these statements will prove to be correct and assumes no responsibility to update these statements. Contact Information ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ More information about Zion is available at www.zionoil.com or by contacting Michael Williams at Zion Oil & Gas, Inc., 6510 Abrams Rd., Suite 300, Dallas, TX 75231; telephone 1-214-221-4610; email: dallas@zionoil.com ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

State of Israel Updates Petroleum Rights List

Israel’s Ministry of National Infrastructures has updated their list of companies that own oil and gas exploration rights in Israel. If a company isn’t on this list it does not have the right to explore for oil and gas in Israel. The exploration rights list (PetroleumRights170210a-1) and exploration rights map (PetroleumRights15_10_09Geogr.jpg) go together to show rights ownership and the location of the rights territory.

The Israeli Petroleum Law states that “petroleum resources belong to the State.” These State owned resources extend beyond the land itself to include Israel’s territorial waters.

The Law governs all exploration and production of all petroleum products. It provides three types of permits to explore for or produce petroleum in the country. The first “preliminary permit” allows the holder to conduct initial prospecting in the permit area with the exception of drilling. This eighteen month permit also gives the holder the privilege of requesting a “priority right” on the permit area. The priority right prevents awarding the area’s petroleum rights to anyone else during the term of the permit. The second permit stage is a three to four year “exploration license.” This license allows the drilling of test wells in an area of not more than 400,000 dunam (100,000 acres). If and when a prospector discovers oil in economically retrievable quantities under the exploration license he may apply for a “production lease.” The production lease term is thirty years, extendable to fifty years.

Just because a company has been granted an exploration or production license in an area doesn’t mean it is granted physical access to the area. Once issued a permit, license, or lease, the holder must also secure permission from other State agencies and property owners to actually conduct activities in the license area. The holder is also required to submit regular progress reports and final reports to Ministry of Infrastructure. All research, test results, studies and any other information produced through exploration efforts are to be submitted to the Ministry as the property of the state.

The production lease gives the lessee the right to market any petroleum produced, subject to the State of Israel preempting the petroleum for its own use. Israel also collects a 12½% royalty on all petroleum produced. All in all, Israel’s petroleum law effectively allows outside commercial entities (the licensees) to finance the exploration and production of oil in the country. Israel benefits by having access to all the exploration data and 12 ½% of all the oil produced.

Noble Energy plans $530m investment in Israel

The company plans to resume exploration in the Eastern Mediterranean.

Amiram Barkat21 Feb 10 16:56

Oil and gas exploration company Noble Energy Inc. (NYSE: NBL) will invest $530 million in natural gas exploration in Israel and in development of its current reserves at Yam Tethys and Tamar, said company executives during a conference call on Friday.

During the conference call, which followed the publication of Noble Energy’s financial report for the fourth quarter of 2009, Noble Energy chairman and CEO Chuck Davidson said, “Late in the year, we anticipate resuming exploration in the Eastern Med, looking to build on our tremendous success that we’ve had already there in Israel.”

The reference is to economic zones of Israel and Cyprus, probably at the company’s Leviathan license, west of Tamar. Leviathan is jointly owned by Noble Energy, Delek Group Ltd. (TASE: DLEKG), and Ratio Oil Exploration (1992) LP (TASE:RATI.L). Drilling will probably begin after the recently completed 3D seismic study of the strata structure is analyzed.

Noble Energy said that its capital program in 2010 will total $2.5 billion, $1 billion for major projects, most of which will be directed to projects in the Gulf of Mexico, Equatorial Guinea in West Africa, and Tamar.

Noble Energy said that natural gas sales in Israel were 25% lower in 2009 than in 2008. Sales are from the Yam Tethys field offshore from Ashkelon, in which Noble Energy owns 47.1%, with Delek (4.44%) and its subsidiaries Avner Oil and Gas LP (TASE: AVNR.L) (23%) and Delek Drilling LP (TASE: DEDR.L) (25.5%) owning the rest.

Davidson said, “Internationally, we had tremendous exploration success in Israel, with our largest discovery ever at Tamar and subsequent Dalit find. We announced signed letters of content covering $10.5 billion in gross expected revenue, with less a third of resources committed. And we immediately moved forward with the development plans that should lead to the sanction of Tamar this year.”

The Tamar partners today announced that they have signed a third letter of intent for the sale of natural gas to Dimona Silica Industries Ltd. The 17-year contract is worth $500 million. Noble Energy owns 36% of the Tamar prospect, alongside Delek Drilling, Avner Oil, Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) subsidiary Dor Alon Energy Exploration Ltd.

Noble Energy attributed the lower than expected natural gas sales in Israel to warmer than normal weather, increased imports of competing Egyptian gas (from East Mediterranean Gas Company (EMG), which began deliveries in early 2009), and because the company’s customer, Israel Electric Corporation (IEC) (TASE: ELEC.B22) had some downtime on one of their power plants.

Investment house Barclays Capital reiterated its “Overweight” rating on Noble Energy stock, and kept its target price for the share at $84. However, it cut its earnings per share estimate as production guidance figures ranged lower than Barclays analysts had expected. They nevertheless maintain that strong future production growth, beginning in 2012, will support the shares.

Israel Oil & Gas Exploration Boom Continues

Haaretz

Israel has natural gas fever, to judge by the line at the National Infrastructure Ministry’s oil board. “Even when they discovered the Heletz field in the south [in 1955] people weren’t lining up here, but this time even leading financial institutions have been backing all kinds of searches,” a member of the ministry’s oil board told TheMarker. The board member, Ron Nahman, who is also mayor of Ariel, said, “We haven’t had this many requests and inquiries in the past nine years. There’s never been interest like this.” Nahman and the other eight board members are responsible for allocating drilling and exploration rights within Israel and off the country’s shores. (Avi Bar-Eli)

Virtual Jerusalem

The Oil Law advisory council at the Ministry of National Infrastructures met on Monday to review and discuss applications for oil and natural gas exploration licenses and oil production licenses. The council reviewed many applications for oil and natural gas licenses, including oil shales and the transfer of rights.

The council approved six applications:

• A license for Modiin Energy LP for the Yam Hadera prospect.
• A preliminary permit with forward rights for Zerah Oil And Gas Explorations LP and Ginko Oil Exploration LP for the Gulliver offshore prospect.
• A license for Ginko for the land Orly prospect.
• A license for Swiss-based Rig Builders Contracting SA for the land Gurim prospect.
• A license for Dr. Baruch Drin Consultants and Services Ltd. and Griffin Strategic Investments Ltd. for the land Yahel prospect.
• A license for ACC Resources Ltd. for land Shemen prospect (in the Med Ashdod area).

The initial permit is for a maximum of 18 months for an unlimited area, during which preliminary surveys are conducted, including the collation of all current material as well as new material to fill in the information gaps. When the permit period expires, the licensee must apply for a drilling prospect.

A license is for three years, with an option for renewal, and requires drilling a well. An extension is for a maximum of seven years.

If and when commercial quantities oil or gas are discovered, the license is for a maximum of 50 years. The holding will not be granted for more than 30 years in the first stage, and only subject to justifying the reservoir’s potential.

Zerah and Ginko get Negev gas exploration license

The Orly prospect is north of Arad.

Globes Online: Mira Awwad 16 Feb 10 17:46

The Orly license covers a 102,400 (50,600-acre) area in the southern Judean Desert, above the Dead Sea.

Under the terms of the license, Zerah and Ginko will conduct a 2D seismic survey of the prospect by mid-October 2010, analyze the results and submit a drilling proposal by mid-February 2011. They will begin drilling a 2,000-meter well by mid-October 2011, and submit a report for further operations at the well within four months of the completion of the well.

Last week, Zerah obtained the offshore Gulliver license.

Zion Oil to Present at the NASDAQ-Oppenheimer Israeli Equities Conference in New York

Zion Oil & Gas, Inc. (Nasdaq:ZN) will be participating at the NASDAQ OMX and Oppenheimer 14^th Annual Israeli Equities Conference in New York on February 23, 2010.

Richard Rinberg, Zion’s Chief Executive Officer, and Bill Ottaviani, Zion’s President and Chief Operating Officer, are scheduled to present at the conference at 3:05 p.m. EST on February 23, 2010. A copy of the presentation will be made available on Zion’s website after that date.

Zion’s common stock trades on the NASDAQ Global Market under the symbol “ZN” and Zion’s warrants trade under the symbol “ZNWAW”.

Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel, in areas located on-shore between Haifa and Tel Aviv. It currently holds two petroleum exploration licenses, the Joseph and the Asher-Menashe Licenses, between Netanya, in the south, and Haifa, in the north, covering a total of approximately 162,000 acres and the Issachar-Zebulun Permit Area, adjacent to and to the east of Zion’s Asher-Menashe license area, covering approximately 165,000 acres. Zion’s total petroleum exploration rights area is approximately 327,000 acres.

About the 14th Annual Israeli Equities Conference

NASDAQ OMX and Oppenheimer & Co. are pleased to present the upcoming 14th Annual Israeli Equities Conference to be held February 23-24, 2010 at Oppenheimer’s offices at 300 Madison Avenue in New York City.

This conference will bring together over 20 of Israel’s leading companies representing a variety of industries and a range of market capitalization. The format will consist of investor presentations and 1-on-1 and small group meetings. This setting offers both investors and company management intimate discussion on the business environment in Israel and globally.

About Oppenheimer

Oppenheimer & Co. Inc. (“Oppenheimer”) is a leading investment bank and full-service investment firm that provides financial services and advice to high net worth investors, individuals, businesses and institutions. For over 125 years, Oppenheimer has provided investors with the necessary expertise and insight to meet the challenge of achieving their financial goals.

Oppenheimer is a wholly owned subsidiary of Oppenheimer Holdings Inc., an integrated financial services holdings company. Oppenheimer Holdings Inc.’s other wholly owned subsidiaries include Oppenheimer Asset Management Inc., Oppenheimer Life Agencies Ltd., and Oppenheimer Trust Company.

The Great Treasure Hunt

Would you like to know?

* Where the greatest treasure in the world is buried?

* Why Russia will attack Israel?

* The secret behind the battle of Armageddon?

This is Special 25th Anniversary Edition of Jim Spillman’s The Great Treasure   Hunt, the book that started the search for oil in Israel based on God’s promise to the Children of Israel in the Bible.
Completely redesigned and digitally reformatted, this special edition printing contains the all of the text and maps from Jim Spillman’s original The Great Treasure Hunt.

Jim Spillman, author, Greek scholar, historian, evangelist, and Christian educator was widely known for his charismatic ministry and personality. As an evangelist and author Jim used his unique mix of spiritual and educational depth with humor to reach people where they were.  Audiences around the world were captivated by the power of God demonstrated in his life and brought to Christ for salvation, baptism, healing, and other mighty works of renewal.
Jim left this earth for his eternal home in late 2002. His work, however, continues to touch people’s lives through books, and recorded material that remain as fresh and relevant today as when they were first produced.

The Great Treasure Hunt by: Jim Spillman,

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“Breaking The Treasure Code” Tells the Story of Israel’s Oil Discovery

Breaking the Treasure Code: The Hunt For Israel’s Oil tells the story of the prophecy leading to Israel’s oil discovery and its fulfillment today. In light recent exploration and of Israel’s breaking news of a massive natural gas discovery off the coast of Haifa, this book and its implications are more relevant today than ever.

Joel Rosenberg, author of Epicenter says, “Israel? Proven Reserves? Billions? When I read those words, the hair on the back of my neck stood ss.comup … Little did I know.”

Joseph Farah of World Net Daily says, “If you read one book on Israel in prophecy this year, pick this one.”

Jack Kinsella of The Omega Letter says, “Breaking the Treasure Code is both fascinating and relevant.”

If you haven’t read this important book yet, get it, read it, and watch Bible prophecy unfold into one of the greatest news stories of this century! Buy Breaking the Treasure Code: The Hunt for Israel’s Oil now for 20% off the bookstore price ($14.95 $11.96 + $5.00 shipping) by clicking the ‘Add to Cart’ button below, or order by phone toll free (888) 543-8028. (P.S. Don’t forget to order and extra copy to share with your pastor, a relative or friend.)

Brown & Spillman Radio Interview

Zion Oil Founder John Brown and Steve Spillman, author of Breaking the Treasure Code: the Hunt for Israel’s Oil discussed the latest updates in the search for Israel’s oil with Jan Markell on her weekly radio program ‘Understanding the Times’. The show aired live on Saturday, February 13, 10:00 AM CST. The entire interview is available for listening at http://www.olivetreeviews.org/radio/mp3/.

Zion Oil Update February 12, 2010

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Zion Oil & Gas Newsletter February 12, 2010 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Dear Shareholder and/or Friend of Zion… On Monday, ‘Maariv’ (one of the major daily Hebrew language newspapers in Israel) sent their reporter, Mordechai Chaimovitch, to visit both our Caesarea office and the Ma’anit-Rehoboth #2 and Elijah #3 well sites. They conducted some interviews, took many photographs and then followed up, on Tuesday, with a telephone interview with John Brown in Dallas. Zion has been featured or mentioned in various articles in the business press recently, as ‘Oil & Gas in Israel’ continues to be a ‘hot topic’ that is attracting very great interest in Israel. ……………………………………………………… Here is this week’s operations update. Operations at the Elijah #3 Well The Elijah #3 well was drilled to a depth of approximately 10,938 feet (3,334 meters) when the drill string became stuck within the Asher Volcanics section of the hole. In last week’s update, I noted that we reached an impasse in our fishing operations at the Elijah #3 well, after achieving a good measure of progress in recovering the stuck drill pipe. As a result of the impasse, we decided to temporarily suspend drilling activities at the Elijah #3 well, while we consider various options to resolve the challenge of drilling through the loosely consolidated Asher Volcanics to our target depth, as well as retrieving the stuck pipe. Almost certainly, we will need to import into Israel equipment and/or services that are not readily available here. Rather than suspending all well operations and putting the drilling rig in stand-by mode in order to take the necessary time to formulate a revised plan at the Elijah #3 well, we decided to relocate the rig to the Ma’anit-Rehoboth #2 well for production testing (see summary below). As you can see in the photographs above, we are currently in the process of demobilizing the rig and associated equipment from the Elijah #3 well site. The well site itself will remain in “ready mode” for future operations. Based on our current geologic assessment, we remain encouraged about the hydrocarbon potential in this license area and look forward to the not-too-distant future when we return and complete the work that is already well underway. The Ma’anit-Rehoboth #2 Well We are now in the process of getting ready to re-enter this well to conduct production testing on several geologic intervals. As noted previously, the Ma’anit-Rehoboth #2 well was drilled to a depth of 17,913 feet (5,460 meters) and had been temporarily suspended since December 2009. During a routine workover operation, prior to the well’s suspension, a small quantity of oil was recovered from the well, giving physical evidence to support our geologist’s contention that the well penetrated hydrocarbon bearing intervals. The decision to mobilize the drilling rig from the Elijah #3 well to the Ma’anit-Rehoboth #2 well is a major undertaking, as we need to prepare the Ma’anit site and relocate many tons of equipment by a distance of approximately 25 kilometers. The project to move the rig requires approximately two weeks before the rig mast is erected again and well operations may begin anew. We have finalized our testing procedures for the Ma’anit-Rehoboth #2 well and are now ordering the required equipment and services so that work may begin when the rig becomes operational.  In the meantime, we continue to observe evidence of reservoir pressure and the presence of potential hydrocarbons at the surface and are anxiously awaiting the rig’s arrival at the Ma’anit-Rehoboth #2 well site, later this month. The Issachar-Zebulun Permit Area As reported previously, Zion and the Geophysical Institute of Israel (GII) have signed an Agreement for GII, on behalf of Zion, to acquire approximately 30 kilometers of seismic data in Zion’s Issachar-Zebulun Permit area. Pre-site assessment is scheduled to begin this month with the actual field work anticipated to occur during April and May 2010. The Annual Meeting Of Shareholders We will be sending out formal notices later in the year, but you may be interested to note in your diary that Zion’s Annual Meeting of Shareholders is scheduled to take place, in Israel, on Monday, June 14, 2010. This may be an opportunity for you to visit Israel, attend Zion’s Annual Meeting and enjoy a trip to the Holy Land. “In your good pleasure, make Zion prosper...” Psalm 51:18 Thank you for your support of Zion, and Shalom from Israel Richard Rinberg CEO of Zion Oil & Gas, Inc. www.zionoil.com FORWARD LOOKING STATEMENTS: Statements in this communication that are not historical fact, including statements regarding Zion’s planned operations, geophysical and geological data and interpretation, anticipated attributes of geological strata being drilled, drilling efforts and locations, the presence or recoverability of hydrocarbons, timing and potential results thereof and plans contingent thereon and sufficiency of cash reserves are forward-looking statements as defined in the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on assumptions that are subject to significant known and unknown risks, uncertainties and other unpredictable factors, many of which are described in Zion’s periodic reports filed with the SEC and are beyond Zion’s control. These risks could cause Zion’s actual performance to differ materially from the results predicted by these forward-looking statements. Zion can give no assurance that the expectations reflected in these statements will prove to be correct and assumes no responsibility to update these statements. Contact Information ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ More information about Zion is available at www.zionoil.com or by contacting Michael Williams at Zion Oil & Gas, Inc., 6510 Abrams Rd., Suite 300, Dallas, TX 75231; telephone 1-214-221-4610; email: dallas@zionoil.com ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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