Israel Approves Doubling Oil & Gas Taxes

Israel Approves Doubling of Taxes on Oil and Gas Extraction Profits

New York Times By ETHAN BRONNER

Published: January 23, 2011

• JERUSALEM — The Israeli government on Sunday approved a near doubling of the profit tax on gas and oil extracted from its territory, a move of considerable significance in the wake of recent offshore gas discoveries expected to be worth tens of billions of dollars.

The cabinet voted overwhelmingly to accept the recommendations of a government committee to tax energy profits between 52 and 62 percent and to set aside a special fund from the income aimed at a range of public needs.

“I intend to establish a fund for Israel’s future that will be devoted to education and security,” Prime Minister Benjamin Netanyahu said at the cabinet meeting. Parliamentary approval is considered a certainty, but debate will doubtless occur on the priorities of the new fund.

In the past few years, about 25 trillion cubic feet of natural gas have been discovered off Israel’s northern shore, enough to turn it from a vulnerable energy importer into a robust exporter. In recent weeks, exploration companies have announced a 20 percent likelihood of there being four billion barrels of oil under the gas, which could prove still more significant.

The companies, along with some conservative political forces, have fought hard against any increase in the profit tax, saying that the cost of exploration is so high that the rate will endanger the viability of the enterprise.

But Eytan Sheshinski, a Hebrew University economist who led the government committee that recommended the increase, said the new rate was slightly below the average of the Organization for Economic Cooperation and Development, a group of more than 30 countries that Israel recently joined.

“We often chide ourselves in Israel that our policy-making decisions lack real planning,” Mr. Sheshinski said in a telephone interview. “Yet here was a process in which the committee sat for nine months, taking testimony that added up to thousands of pages. This was a real process of which we can all be proud.”

Finance Minister Yuval Steinitz said after the cabinet vote, “Today the government will put an end to the disgrace in which the citizens of Israel do not benefit from the country’s natural resources, as do the citizens of other developed nations.”

Dead Sea Well Approved for Drilling

Shahar prospect gets nod for drilling

The well, due to begin drilling in the second quarter, is targeting oil-bearing strata at a depth of 3,300 meters.

Globes 31 January 11 12:22, Yael Gruntman

The Southern Regional Planning and Building Commission has approved the drilling of the Shahar 1 well, scheduled to begin in the second quarter of 2010. The well will drill to deep oil-bearing target strata.

Ginko Oil Exploration LP, which fully owns the license, has two positive opinions about the amount about the amount of oil in the license area: one by Dr. Haim Fliegelman, who estimates 260 million barrels of oil, and a second by UK consultancy firm Simco Petroleum (Management) Ltd., which estimates 9-138 million barrels of oil in the target strata.

At the current price of oil of $90 per barrel, the high-end estimate of 260 million barrels of oil is worth $23.4 billion, and the mid-range estimate of 41 million barrels of oil is worth $3.69 billion. Either way, the field has huge potential.

The Shahar license covers 389,000 dunam (97,250 acres) south of the Arava junction at the southern end of the Dead Sea valley. The Shahar 1 well will drill to 3,300 meters at a cost of $9 million. Lapidoth Israel Oil Prospectors Corporation Ltd. (TASE: LAPD) will probably be the well contractor.

Ginko, which owns the Shahar license, is in the final stages of merging with stock market shell Simcha Urieli & Sons Engineering & Construction Co, Ltd. (TASE: UREL), after Urieli’s shareholders approved the merger agreement last week.

Oil Discovered in Northern Israel

In case anyone missed it last summer, oil has been discovered in Northern Israel. We’re not waiting for an oil discovery – it’s already happened! The oil has been/is being produced and sold. What’s more, the exploration company, Givot Olam, based its search for oil in Israel on Scripture. That’s right, oil has been discovered in Israel, based on Bible passages predicting the discovery and its location. The same Bible (Torah) passages used by my father, Jim Spillman, back in 1981 in his book, The Great Treasure Hunt. The same passages Zion Oil & Gas Founder John Brown heard Dad teach on a Zion Temple in Michigan thirty years ago and took to heart. Included Jacob’s Blessing, recorded in Genesis 49 and Deuteronomy 33, is the prophecy of a last days oil discovery. Jacob’s descendants will be blessed from the “deep that coucheth beneath”; “for the chief things of the ancient mountains, and for the precious things of the lasting hills, and for the precious things of the earth.” Issachar and Zebulun “shall suck of the abundance of the seas and of treasures hid in the sand.” Asher will “dip his foot in oil.”

The prophecy of oil in Israel isn’t going to be fulfilled someday – it is being fulfilled as we watch!

A January 13 Globes Article follows progress at Givot Olam’s Meged 5 well site; I’ll share a few excerpts here:

“Givot Olam Oil Exploration LP (TASE:GIVO.L), which is currently fracing (hydraulic fracturing) sections of its Meged 5 well and carrying out production tests, is seeking to cool investors’ enthusiasm after yesterday’s flare at the wellhead, which indicates the presence of fuel at the well. The scale of production, if any, is unknown, but the flare is a routine procedure during production tests.”

“A few months ago, Givot announced that production tests conducted during the summer produced an average of 382 barrels of oil a day. Fracing is now underway in sections 1-6 of the borehole to speed up the production rate, and production tests are underway of sections 7-8.”

“Givot sold 6,000 barrels of oil produced during last summer’s production tests to Oil Refineries Ltd. (TASE:ORL) at the below market price of $60 per barrel. It cannot be ruled out that oil currently being produced is also being sold to Oil Refineries, and is why there are oil tankers at the wellhead. However, how much oil is being sold is not known.”

“A capital market source close to the matter told “Globes”, “When you peel away all the conduct of the past year, Meged 5 ultimately has something real.”

Givot’s Meged 5 is just the beginning of onshore oil discoveries in Israel. I believe Givot will drill more and produce much more in their Meged oil field.

Zion Oil & Gas, just to the north of Givot Olam, controls 327,000 acres of exploration territory and is in the final stages of drilling their fourth well, the Ma’anit-Joseph #3. In just weeks, Zion will be at its final depth of 19,000 feet.

With Israel’s recent gas discovery, the country is now staged to be natural gas independent (natural gas now powers some of Israel’s power plants and by the end of the decade, most likely, all electrical generation will come from natural gas fired plants). Noble Energy, one of the exploration partners on the gas discovery says they believe substantial oil reserves are under the gas fields.

Israel now has enough natural gas to supply its needs into the foreseeable future and for export. With the ongoing operations of Givot Olam, Zion Oil & Gas, Noble Energy can oil independence for Israel be far behind? I don’t think so.

What do you think?

Lebanon asks UN to guard gas from Israeli drilling

* Lebanon asks U.N. to prevent Israel tapping its reserves

* The two countries have no agreed maritime border

BEIRUT, Jan 4 (Reuters) – Lebanon has asked U.N. Secretary-General Ban Ki-moon to ensure that Israel’s plans to drill for gas in the Mediterranean do not encroach on its own offshore reserves, the National News Agency said on Tuesday.

It said Foreign Minister Ali al-Shami wrote to Ban asking him to “exert every possible effort to prevent Israel exploiting Lebanon’s maritime hydrocarbon resources which fall within its exclusive economic zone”.

Shami’s letter came a week after Texas-based Noble Energy (NBL.N:Quote) and its Israeli exploration partners said the Leviathan prospect — 130 km (80 miles) off the Israeli port of Haifa — was the world’s biggest deepwater gas find in the past decade. [ID:nLDE6BS10F]

Lebanon says that seismic surveys have identified promising quantities of natural gas in its own waters.

But Israel, which fought a month-long war with Lebanese group Hezbollah in 2006, has no agreed maritime border with Lebanon. Lebanese politicians say they fear Israel may drill in Lebanon’s waters or extract gas from common fields. Israel has said the gas falls within its own waters.

Shami stressed “Lebanon’s right to exploit fully its hydrocarbon resources, which fall within its exclusive economic zone, based on legitimate rights established by international law,” according to the news agency.

“Any Israeli exploitation of this resource would be a blatant violation of these laws and an attack on Lebanese sovereignty,” he added.

Spurred on by Israel’s plans to drill for gas, Lebanon’s parliament ratified a long-awaited energy law last August, which paves the way for exploration of offshore reserves.

But it still has a long way to go to catch up with Israel. It must identify blocs for exploration, supply data to interested investors, select bidders and have companies start work, while the Israelis already have firms drilling for gas. (Reporting by Dominic Evans; Editing by Jane Baird)

Zion Oil Reduces Warrant Price

Dallas, Texas and Caesarea, Israel – January 3, 2011: Zion Oil & Gas, Inc. (NASDAQ GM: ZN, ZNWAW) today announced that it has temporarily reduced the exercise price of its outstanding publicly traded warrants under the symbol ZNWAW (the “Warrants”) to $4.00 (from the $7.00 exercise price provided by the original terms of the Warrants) until 5:00 p.m. eastern time on March 7, 2011 (the “Expiration Time”). Any and all Warrants properly exercised in accordance with the terms of the Warrants prior to the Expiration Time will be accepted by Zion at the reduced exercise price and one share of registered common stock per Warrant will be issued to the exercising Warrant holder. After the Expiration Time, the $7.00 exercise price included in the original terms of the Warrants will be reinstituted. Except for the reduced exercise price of the Warrants prior to the Expiration Time, the terms of the Warrants remain unchanged. The reduced exercise price applies to all of Zion’s currently outstanding Warrants that publicly trade under the symbol ZNWAW. Holders of Warrants that desire to exercise their Warrants should contact their brokers and instruct them to exercise the Warrants prior to the Expiration Time.

As of today’s date, approximately 606,000 ZNWAW Warrants are outstanding. Zion’s common stock is listed on the NASDAQ GLOBAL Market under the symbol ZN and Zion’s Warrants being reduced are listed on the NASDAQ GLOBAL Market under the symbol ZNWAW. Zion recommends that Warrant holders obtain current market quotations for Zion’s securities before deciding whether or not to exercise their Warrants.

Richard Rinberg, CEO of Zion, stated, “We are pleased to offer our ZNWAW warrant holders the opportunity to exercise their warrants at a reduced exercise price of $4.00 and hope that a substantial number of these warrants will be exercised. We want to be fair to all of Zion’s investors and in addition to potentially raising a significant amount of capital for Zion, we believe that a reduction in the number of our outstanding warrants will simplify our capital structure and reduce the overhang of those warrants on the Company’s common stock”.

ZION’S BOARD OF DIRECTORS HAS APPROVED THE WARRANT EXERCISE PRICE REDUCTION. HOWEVER, NEITHER ZION NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES MAKES ANY RECOMMENDATION AS TO WHETHER TO EXERCISE WARRANTS. EACH HOLDER OF A WARRANT MUST MAKE ITS OWN DECISION AS TO WHETHER TO EXERCISE A WARRANT.

The information above does not constitute an offer to buy or exchange securities or constitute the solicitation of an offer to sell or exchange any securities in Zion.

Leviathan Discovery Opens a New Era for Israel

WASHINGTON, Dec. 29, 2010 /PRNewswire/ – David Wurmser, Ph.D., founder and executive member of the Delphi Global Analysis Group, LLC (Delphi), today issued the following statement regarding confimation of the Leviathan field offshore Israel as a major natural gas discovery with 16 Tcf of reserves. Delphi specializes in geopolitical risk analysis and mitigation, with a focus on energy development in Israel and throughout the Levant Basin.

“The Leviathan discovery opens a new era of natural gas development offshore Israel. Production of so large a quantity of gas relative to Israel will trigger major political changes. A resource of this magnitude will allow Israel to implement an energy policy that advances security, economic growth, and the environment. From power generation to desalination to transportation, the benefits of significant Israeli natural gas production promise to be profound,” said Dr. Wurmser.

“Israel is now positioned to become an exporter of natural gas. If encouraged by effective public policy, the fiscal, macroeconomic, and geo-strategic implications of developing offshore natural gas promise to rank among the most important advances in the history of the modern State of Israel.

“Accompanying a myriad of positive outcomes attached to Leviathan will be a series of serious political challenges. The temptation of excessive taxation and the internal battles over allocation of government revenue will intensify. Israel lacks energy-sector expertise and financing for large energy projects. Government officials have expressed concerns about concentrations of wealth and power in the hands of a few, as well as the impact of a stronger shekel on Israel’s export-driven economy. Policy makers, energy companies, and the financial community confront a complex and volatile political landscape,” concluded Dr. Wurmser.