Liquified Natural Gas Flow From Offshore Israel Begins Today

The Jerusalem Post wrote in an article yesterday that an offshore transmission buoy would begin operating today, supplying liquefied natural gas to Israel. Israel’s offshore Tamar gas field won’t begin production until April, but the offshore buoy is capable of supplying 4 -5 million cubic meters per day until Tamar’s production comes online. The Israeli government estimates that this new supply channel of natural gas will save the their economy 500 million NIS ($135 million) in just the first few weeks of operation, and billions in the next few years. Energy transferred from the new natural gas supply will generate 3,000 to 4,000 megawatts per hour (30,000 – 40,000 homes). This new supply is a milestone in Israel’s 80/20 goal, to have 80% of the country’s electrical energy needs supplied by natural gas. When Israel’s recent natural gas discoveries come into production they will be capable of supplying 100% of their natural gas needs without imports and export natural gas to other markets.

Read the Jerusalem Post article by clicking here.

Zion’s Elijah #3 is a No-Go

Zion Oil & Gas announced yesterday in a newsletter to shareholders and friends that results from their second re-entry into the Elijah #3 well failed to give enough evidence of hydrocarbons to continue developing the well. Read more

Zion Discusses Key Geologic Features of License Area

In this video, taken at Zion Oil’s Elijah #3 wellsite on July 17, 2012, Zion Oil & Gas President/COO Victor Carrillo and Geologist Aaron Kahn discuss key features and formations on a geological map of Zion’s License areas in Israel.

Zion Oil & Gas Jordan Valley License Area

In this video, taken at Zion Oil’s Elijah #3 wellsite on July 17, 2012, Zion Oil & Gas geologist Aaron Kahn discusses the Jordan Valley License Area.

 

Zion Oil & Gas Asher Menashe License Area

In this video, taken at Zion Oil’s Elijah #3 wellsite in Northern Israel on July 17, 2012, Zion President and COO talks about Zion’s Asher-Menashe license area.

Victor Carrillo Explains the Elijah #3 Re-entry Program

Back on July 17 of this year, we shot some video with Zion Oil & Gas President and COO Victor Carrillo and Zion geologist Aaron Kahn at the Elijah #3 wellsite before they began re-entry. In this video, Victor explains the goals behind re-entering the Elijah #3 well. In light of this week’s Press Release from Zion Oil, this video, taken before the fact, is particularly meaningful.

Very, Very, Good News From Zion Oil … we think

Zion Oil & Gas sent out a Press Release late Wednesday entitled “Zion Oil & Gas Announces Successful Re-entry Operations at its Elijah #3 Well in Northern Israel.”

The language of the Press Release was couched in a lawyer/geologist kind of mumbo-jumbo, but I highlighted what I thought I understood as significant. Here is the Press Release in its entirety (without Zion’s Contact information)  - my highlights are in red:

Zion Oil & Gas Announces Successful Re-Entry Operations at its Elijah #3 Well in Northern Israel

Dallas, Texas and Caesarea, Israel – August 8, 2012 – Zion Oil & Gas, Inc. (NASDAQ GM: ZN) announced the successful end of field operations at its Elijah #3 wellsite within its 78,824 acre Asher-Menashe License in northern Israel.

In July 2012, Zion re-entered the existing wellbore of its temporarily suspended Elijah #3 well and acquired an electric wireline log suite that had not been acquired when the well was originally drilled in 2010. A Formation Evaluation Log (an advanced petrophysical evaluation analysis) was then derived from the newly acquired log suite and Zion subsequently obtained approximately 48 sidewall core samples from key zones in the previously drilled wellbore. During the re-entry operations, Zion also obtained vertical seismic profile (VSP) data.  Zion was assisted in this project by Baker Hughes, the Geophysical Institute of Israel, NuTech Energy Alliance (“NuTech”), Core Labs, and Bedrock Petroleum Consultants.

A preliminary review of the NuTech Formation Evaluation Log indicates the presence of a series of carbonates over two thousand feet thick, with the possibility of interspersed zones of developed fair to good porosity and permeability with oil shows (up to a combined several hundred feet thick) at depths shallower than 9,350 feet. When the sidewall core samples were retrieved, dark brown hydrocarbon stains were noted on some sidewall core samples. The core samples have been sent to Houston, Texas for further analysis and both Baker Hughes and the Geophysical Institute of Israel are processing the VSP data. Zion estimates that the analysis of the core samples and the VSP processing and analysis will take at least one month.

Zion’s Chief Executive Officer, Richard Rinberg, said, “After successfully completing this exploratory work, initial indications are positive; however, much analysis needs to be carried out during the coming weeks and months.”

Zion’s President and Chief Operating Officer, Victor G. Carrillo, said: “We are excited about the potential of this relatively shallow, stacked carbonate with a possible Jurassic oil column in our Elijah #3 wellbore.  The combination of old data and newly acquired geophysical and geological data represents the most extensive dataset Zion has ever had, as the Company has never previously obtained VSP or sidewall core data. I believe this combination of data will give us a better subsurface image of the hydrocarbon potential in proximity to this wellbore.”

The primary purpose of the re-entry operation was to obtain additional geologic and geophysical data and to better understand the hydrocarbon potential of a zone through which Zion drilled while drilling the Elijah #3 well in late 2009 and early 2010. The Elijah #3 well, originally planned to drill to below 17,000 feet, to test both Triassic and Permian-aged geological formations, was temporarily suspended in 2010 after encountering technical issues at a total depth of approximately 11,000 feet. In the recently completed field operations, the rig arrived at the Elijah #3 wellsite on July 15, 2012, and was released by the Company on August 8, 2012.

Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located onshore between Haifa and Tel Aviv. It currently holds three petroleum exploration licenses: the Joseph License (on approximately 83,272 acres) and the Asher-Menashe License (on approximately 78,824 acres) between Netanya, in the south, and Haifa, in the north, and the Jordan Valley License (on approximately 55,845 acres), just south of the Sea of Galilee. The total license area amounts to approximately 218,000 acres.

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 time frame of the completion of testing and analysis, anticipated attributes of geological strata being drilled, drilling efforts and locations, the presence or recoverability of hydrocarbons, sufficiency of cash reserves, timing and potential results thereof and plans contingent thereon 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. 

Let’s define, or give significance to a few terms:

successful: “accomplishing an aim or purpose” (Oxford Dictionary)

carbonates: “It is estimated that more than 60% of the world’s oil and 40% of the world’s gas reserves are held in carbonate reservoirs. The Middle East, for example, is dominated by carbonate fields, with around 70% of oil and 90% of gas reserves held within these reservoirs.” (Schlumberger)

porosity and permeability:  “Porosity and permeability are related properties of any rock or loose sediment… Porosity of a rock is a measure of its ability to hold a fluid…. The permeability of a rock is a measure of the resistance to the flow of a fluid through a rock.”  (Introduction to Petroleum Geology)

oil column: “The difference in elevation between the highest and lowest portions of various producing zones of an oil-producing formation.” (McGraw-Hill Dictionary of Scientific & Technical Terms)

oil show: “Hydrocarbons occur in the subsurface in four modes: (1) continuous phase oil or gas, (2) isolated droplets of oil or gas, (3) dissolved hydrocarbons, and (4) associated with kerogenous rocks. All of these modes of occurrence can result in what is described as a subsurface hydrocarbon “show.” (Interpretation of Subsurface Hydrocarbon Shows)

So what do I understand from the Press Press Release?

“The primary purpose of the re-entry operation was to obtain additional geologic and geophysical data and to better understand the hydrocarbon potential.” … and … Zion reported a “successful end of field operations.” Zion is happy enough with what they found that  they’re considering the re-rentry “successful.”

What did they find? “ …the presence of a series of carbonates over two thousand feet thick, with the possibility of interspersed zones of developed fair to good porosity and permeability with oil shows (up to a combined several hundred feet thick) … and … “dark brown hydrocarbon stains were noted on some sidewall core samples” … and … “a possible Jurassic oil column.”

Words of warning:

Here are a few more important terms from the Press Release we can’t ignore: “preliminary review”; “core samples have been sent to Houston, Texas for further analysis“; “analysis of the core samples and the VSP processing and analysis will take at least one month“; “much analysis needs to be carried out during the coming weeks and months.” 

And here’s the biggee: Statements in this communication that are not historical fact, including statements regarding Zion’s planned operations, geophysical and geological data and interpretation, anticipated time frame of the completion of testing and analysis, anticipated attributes of geological strata being drilled, drilling efforts and locations, the presence or recoverability of hydrocarbons, sufficiency of cash reserves, timing and potential results thereof and plans contingent thereon 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.

Bottom line? From what I understand of the Press Release, Zion found signs of oil in the Elijah #3 well and the rock formations necessary for oil to reside and flow. They also completed the testing necessary to determine their next move regarding this discovery. The results of the testing will take “at least one month.”

I’ll put it on my calendar ….

Israel Battles Use vs Export of Natural Gas

(from “Israel to Generate 70% of Electricity from Gas by 2016, but Policymakers Lag Behind” by Malkah Fleisher, Jewish Press.com)

Recent news of a massive natural gas well have turned eyes on Israel’s struggle to adopt an energy policy in the wake of its first-time gas wealth.  Trying to measure the value of energy independence against short-term profits, Israel has shown that its unexpected blessing comes with a price.

In 2009, Tamar, located approximately 80 kilometers off the coast of Haifa, was the world’s largest natural gas discovery, endowing Israel with over 9 trillion cubic feet of natural gas.  The confetti had barely settled when Leviathan, 40 kilometers farther offshore, shocked the nation and the world with a payload double that of Tamar, and the esteemed honor of being the largest offshore natural gas discovery in the world in over ten years, and totally a grandiose 700 billion cubic metres (24.7 trillion cubic feet).

Financial and energy analysts could barely contain themselves.  Joyful predictions of long-coveted but previously inconceivable energy independence were raised, alongside the gleeful shouts of financial analysts who anticipated massive income from the export of gas.

And the battle for the mind of Israel’s government began.  Prime Minister Benjamin Netanyahu instituted a commission headed by Minister of Water and Energy Shaul Tzemach to investigate the sensibleness of exporting Israel’s new wealth of natural gas, which would supply Israeli needs for decades if kept under Israeli ownership.  His initial report recommended saving as much gas as necessary to fuel Israel through 2040.  Yet Finance Minister Yuval Steinitz pushed back, saying Israel should be allowed to export more.  So Tzemach promised a reconsideration and another report.

Yet before a report – which is due any day – could be issued, Avner, Delek, and Noble Energy companies – partners in the drilling projects and owners of the energy cache – made a quiet deal with Russia, agreeing to sell the superpower gas for the next 20 years at a fixed price – amounting to half the output of the Tamar field. (read the entire article)

Zion Oil Re-enters Elijah #3 Well

Zion Oil & Gas began re-entry operations this week at their Elijah #3 well in Northern Israel. Israeli drilling company, Lapidoth, erected it’s drilling rig and prepared the site. Zion is scheduled to begin its vertical seismic profile operation in the well early next week after completing wireline logging.

Zion Oil & Gas to Re-enter the Elijah #3 Well in Northern Israel

Dallas, Texas and Caesarea, Israel – July 2, 2012 – Zion Oil & Gas, Inc. (NASDAQ GM: ZN) announced today that, on June 28, 2012, it signed an agreement with Lapidoth Israel Oil Prospectors Corp. Ltd (“Lapidoth”) regarding further exploratory work to be performed in Zion’s Asher-Menashe License area in northern Israel.

Under the terms of the workover agreement, in July 2012, Lapidoth will mobilize their Franks 750 drilling rig to Zion’s temporarily suspended Elijah #3 well. The planned work program includes re-entering the existing wellbore, partially drilling out the existing plug, acquiring electric log data via wireline, acquiring vertical seismic profile data, and possibly obtaining sidewall core samples.

Zion’s Chief Executive Officer, Richard Rinberg, said today, “The signing of the agreement with Lapidoth allows us to move forward with our exploration program in our Asher-Menashe License area. We look forward to acquiring vertical seismic profile data in this petroleum exploration area, as the additional seismic data should help us to evaluate the next steps we need to take with respect to our temporarily suspended Elijah #3 well and also to identify prospects within this license area.”

The primary purpose of the planned work is to obtain additional geologic and geophysical data and to better understand the hydrocarbon potential of a zone through which Zion drilled while drilling the Elijah #3 well in 2009/2010. The Elijah #3 well, originally planned to drill to below 17,000 feet to test both Triassic and Permian-aged geological formations, was temporarily suspended after encountering technical issues at a total depth of approximately 11,000 feet.

Zion’s President and Chief Operating Officer, Victor Carrillo, said today: “We hope to learn more about the observed oil and gas shows in a zone from approximately 8,000 to 9,000 feet that were correlated to other regional hydrocarbon shows. Zion has never sought an offset vertical seismic profile in Israel and we hope to obtain a better subsurface image of the zone near the wellbore to determine future oil prospects in this area.”

Zion Oil & Gas, a Delaware corporation, explores for oil and gas in Israel in areas located onshore between Haifa and Tel Aviv. It currently holds three petroleum exploration licenses: the Joseph License (on approximately 83,272 acres) and the Asher-Menashe License (on approximately 78,824 acres) between Netanya, in the south, and Haifa, in the north, and the Jordan Valley License (on approximately 55,845 acres), just south of the Sea of Galilee. The total license area amounts to approximately 218,000 acres

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