Zion Oil Jan 15 Update

Zion Oil & Gas Newsletter

January 15, 2010

Dear Shareholder and/or Friend of Zion…

There has been quite some discussion by our staff regarding Zion’s weekly updates, as not every week contains ‘news to report’ on every part of our exploration license and permit areas.

The general feeling was that if there is nothing new to report then we should simply state that fact. There will be weeks with much to report and there will be weeks with little to nothing new to report.

Turning to the Book of Ecclesiastes (1:9-10), there is the well known comment:
What has been will be again, what has been done will be done again; there is nothing new under the sun.

Is there anything of which one can say, “Look! This is something new”? It was here already, long ago; it was here before our time.
So, I am not going to continually repeat information that has already been sent to you. Where there is ‘no news to report this week’, I will write just that. But you can be certain that we are doing our best to move Zion’s exploration program forward… every day of every week.

This past week, Zion’s Founder and Chairman, John Brown, visited Israel together with Bill Ottaviani, a Petroleum Engineer who spent 25 years (1982 to 2007) working for Chevron Corporation in various countries and then two years (2007-2009) as Chief Operating Officer of Rex Energy, helping to build up Rex Energy in the USA. John Brown invited Bill Ottaviani to visit Israel as a prospective candidate for Zion’s Board and to review our operations and help advise us regarding some of the recommendations currently under technical evaluation.

Also, this week, we were visited by a team from ‘Halman-Aldubi Group’ one of Israel’s leading institutional Investment Management groups. Halman-Aldubi is the only company in Israel that deals with the management of provident funds on behalf of the public and is completely independent.

There was some Israeli Oil & Gas news released in Israel, this week. On Wednesday, January 13, 2010, the Jerusalem Post noted that Prime Minister Binyamin Netanyahu has ordered work to begin, this month, on a natural gas pipeline that will run from Dor Beach, south of Haifa, up to the oil refineries in Haifa. The significance of the Israeli government continuing to build the onshore natural gas pipeline infrastructure is that, in the event that we are successful in finding and producing commercial quantities of natural gas, the supply and distribution of that natural gas should be possible through the onshore pipeline system.

Here is this week’s operations update.

Drilling Operations at the Elijah #3 Well

The Elijah #3 site L to R: Bill Ottaviani, Richard Rinberg (Zion’s CEO), John Brown (Zion’s Founder and Chairman), Eyal Shuker (Investment Manager at Halman-Aldubi), Sandra Green (Zion’s CFO) and two analysts from Halman-Aldubi

The Elijah #3 well has been cased from the surface down to 6,706 feet (2,044 meters).

For the period from ’spudding’ the well (that is ‘beginning drilling operations’) to December 31, 2009, we drilled to a depth of approximately 9,186 feet (2,800 meters), at an average rate of penetration of approximately 131 feet (40 meters) per day.

As of this morning, the Elijah #3 well has been drilled to a depth of approximately 10,938 feet (3,334 meters).

Both last week and this week, we have been drilling in the Asher Volcanic Complex, composed of tuffs, weathered basalts, non-weathered basalts, red shales and red and tan mudstones.

The Ma’anit-Rehoboth #2 Well

The Ma’anit-Rehoboth #2 Well Site, showing the well head
No additional news to report this week.

The Ma’anit-Rehoboth #2 well was drilled to a depth of 17,913 feet (5,460 meters). The well penetrated a number of geologic formations that have been preliminarily deemed to have hydrocarbon potential and we retrieved a small quantity of crude oil. We are awaiting analysis of that oil and are evaluating recommendations by our engineering staff regarding further testing and possible completion procedures.

The Issachar-Zebulun Permit Area

No additional news to report this week.

We have been reprocessing all of the existing seismic and are planning to acquire, in March 2010, approximately 30 kilometers of field seismic, in the permit area.

Finally, I’ll note that we have begun preliminary discussions with Aladdin Middle East Ltd regarding the drilling of an additional well, in order to progress and implement our multi-well program.
“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 rights offering 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.comhone: 1-888-891-9466

John Brown Interviewed on Fox Business

Zion Oil & Gas founder John Brown was interviewed by Alexis Glick on Fox Business Network’s “Money for Breakfast” television show.

The interview was aired early on the morning of September 3 – the day after Zion ‘rang the bell’  on Wall Street announcing the company’s entry into the NASDAQ global market.

View the interview by clicking on the image below:

Tamar partners to raise large sums for development

The partners in the Tamar and Dalit offshore natural gas fields are preparing to raise capital to develop Israel’s largest natural gas field. Delek Group Ltd. (TASE: DLEKG) subsidiary Delek Energy Systems Ltd. (TASE: DEOL) has published a shelf prospectus to raise hundreds of millions of shekels in the coming weeks and is currently working on the structure of the offering.

Delek Energy controls Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L), which each own 15.625% of the Tamar and Dalit prospects. Last week, both companies, authorized Noble Energy Inc. (NYSE: NBL), which owns 36% of the prospect, to buy $230 million worth of equipment and services by 2011 to develop the gas fields. Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), which owns 28.75% of the prospect approved purchases of up to $160 million.

The partners in the Tamar and Dalit offshore natural gas fields are preparing to raise capital to develop Israel’s largest natural gas field. Delek Group Ltd. (TASE: DLEKG) subsidiary Delek Energy Systems Ltd. (TASE: DEOL) has published a shelf prospectus to raise hundreds of millions of shekels in the coming weeks and is currently working on the structure of the offering.

Delek Energy controls Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L), which each own 15.625% of the Tamar and Dalit prospects. Last week, both companies, authorized Noble Energy Inc. (NYSE: NBL), which owns 36% of the prospect, to buy $230 million worth of equipment and services by 2011 to develop the gas fields. Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), which owns 28.75% of the prospect approved purchases of up to $160 million.

Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) unit Dor Gas Exploration LP, which owns 4% of Tamar and Dalit, is also getting ready to raise capital. Dor Alon plans to split its holding in the prospects from its gas stations and convenience stores business, and create a partnership that will hold the Tamar stake. Dor Alon is working with the Israel Tax Authority on this new structure, which will make it possible for the new partnership to raise capital directly to develop the gas fields.

Dor Alon is meeting with institutional investors to hold a bond issue of up to NIS 250 million for this purpose.

Published by Globes [online], Israel business news – www.globes-online.com – on September 1, 2009

Zion Oil & Gas Rings the NASDAQ Bell

Zion Chairman John Brown, CEO Richard Rinberg and company President Glen Perry got the NASDAQ market going on Wednesday by ringing the opening bell. The ‘opening bell’ ceremony signified the first day of trading for Zion Oil & Gas on the NASDAQ market under the ticker symbol ‘ZN’.

Zion’s move from the NYSE’s AMEX exchange to the NASDAQ Global exchange will give the company access to a much wider financial market.

Zion has demonstrated that they can compete in the global financial market by continuing to hold their stock value and raise significant capital in the midst of the worst financial melt down since the Great Depression. In short, people believe in Zion Oil and the financial world has taken notice.

About Zion Oil & Gas, Inc. (ZN):

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 NASDAQ OMX:

The NASDAQ OMX Group, Inc. is the world’s largest exchange company. It delivers trading, exchange technology and public company services across six continents, with over 3,900 listed companies. NASDAQ OMX Group offers multiple capital raising solutions to companies around the globe, including its U.S. listings market; NASDAQ OMX Nordic, NASDAQ OMX Baltic, including First North; and the U.S. 144A sector. The company offers trading across multiple asset classes including equities, derivatives, debt, commodities, structured products and ETFs.

NASDAQ OMX Group technology supports the operations of over 70 exchanges, clearing organizations and central securities depositories in more than 50 countries. NASDAQ OMX Nordic and NASDAQ OMX Baltic are not legal entities but describe the common offering from NASDAQ OMX Group exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. For more information about NASDAQ OMX, visit http://www.nasdaqomx.com.

Zion Oil Makes NY Times

Market action for Zion Oil & Gas has apparently been hot enough to attract the New York Times  Business Section. Click here to see Friday’s NY Times listing.

Zion Oil Files for New Rights Offering

On Wednesday, July 29, 2009, Zion filed a registration statement with the Securities and Exchange Commission with respect to a proposed Rights Offering to its common stockholders of up to two (2) million shares of common stock. Each whole subscription right will entitle the holder to purchase one share of common stock for $5.00.

Under the proposed rights offering, stockholders have the right to purchase thirteen (13) shares of stock for every one hundred (100) shares of common stock owned on the record date.

Should the rights offering be fully subscribed, the company expects to receive gross proceeds of $10 million, to be used for Zion’s multi-well drilling plan.

Zion CEO Richard Rinberg states: “Although it is not usual to engage in a rights offering immediately following a rights offering, Zion’s Board of Directors have decided to do exactly that.

“In June 2009, we raised gross proceeds of $21 million from a rights offering to common stockholders, but as the rights offering was over-subscribed, we returned approximately $1.1 million in over-subscriptions.

“Due to the very positive reception that our shareholders gave to the completed rights offering and in order to afford an opportunity to shareholders who were not able to exercise subscription rights to the extent that they desired, our Board of Directors decided to commence a new rights offering to our stockholders at the same per share subscription price as the offering completed in June 2009.

“Our drilling program is expensive and we need additional capital in order to fully execute our business plan. So, prior to accessing other sources of capital, we want to give existing shareholders the opportunity to participate in our capital-raising efforts in a manner that allows them to maintain their proportional ownership interest in us.”

If you were among the many hundreds of our stockholders who did not receive as many $5 shares as you subscribed for, this is your ’second chance’ opportunity. This offer is open to everyone who is a stockholder of record on the (as yet undetermined) record date.

Zion Oil Extends Rights Offering

Zion AME Rig Leaves Turkey

The 2,000 horsepower Aladdin Middle East drilling rig contracted by
Zion Oil & Gas to drill the Ma’anit Rehoboth #2 well in northern
Israel was loaded on the the freighter “Umiavut” yesterday at the
Turkish port of Iskenderun.

Moving the rig from Turkey to Israel is no small chore.
Transporting the Zion rig overland requires 80 truckloads of
equipment. That’s 80 trucks loaded in Ankara (inland Turkey) and
transported to the dock at Iskenderun. 80 trucks unloaded and put
aboard ship. 80 trucks unloaded at Haifa, Israel and transported to
Zion’s Ma’anit Rehoboth site. 80 trucks unloaded and set up at the
well site. Whew!

Here’s the estimated time lapse: Transit time via ship from Turkey
to the port of Haifa in Israel is four days. Combined transit and
setup time from the port of Haifa to the well site at Ma’anit is
nine days. Today is April 16. If all goes well, by April 30 (don’t
count Shabbat on the 25th) we may be hearing exciting news from
Israel!

Zion Licenses Fit Israeli Gas Infrastructure

Yesterday a friend reminded me of Israel’s gas pipeline infrastructure. That’s important now that Israel has discovered natural gas. There must be some infrastructure in place to get gas from the well site to where it will be used for energy (mostly power plants).
The Tamar #1 discovery (5 trillion cubic feet) is 80 kilometers off the coast of Haifa. That means in order to bring that gas to market, a pipeline will have to be built from the offshore rig to Haifa and then to the existing Israeli pipeline infrastructure. Noble Energy, primary partner in the Tamar discovery estimates it will be three years before gas from the discovery actually reaches the market. Others in the industry estimate longer.

But then a light went on in my head. I remembered seeing a map of Zion Oil’s license areas and Israel’s existing and planned natural gas pipelines. Here’s the map:

Israel’s existing natural gas pipeline runs north just off the Mediterranean coast. The reason for its current location is to supply fuel for power plants along the coast. Construction is underway for a trunk line to the Hagit and Alon Tavor power plants inland. Another trunk line is planned for this year, running from the coast to the area of Zion’s Ma’anit #l well site. Remember, Zion’s immanent Ma’anit Rehoboth #2 well will use the same wellbore as the Ma’anit #1 – it’s in the same location. Should Zion find gas instead of oil or gas and oil in the Ma’anit #2 well, they would have a built in pipeline infrastructure. In the event of a discovery, they could be supplying natural gas to Israel before the offshore discovery comes on line!

I asked a friend and very high placed source of mine from Israel today about the pipeline. He confirmed what I just laid out and went a step further. There’s a manufacturing plant a few hundred yards from the Ma’anit Rehoboth well site. This plant currently uses diesel fuel to fire its boilers. It has requested to be first in line to buy any gas produced at the Ma’anit Rehoboth site. So there you have it! The greatest natural gas discovery in Israel’s history and Zion, God willing, may beat them to the market. But remember this is all just speculation. Zion has to find the gas first. And, of course, they could find oil – which is what we’ve been looking for all along.

Zion Oil Applies for Issachar-Zebulun License

Zion Oil & Gas applied today for an additional 245,000 acres of exploration area in the biblical lands of Zebulun and Issachar. “… for they [Zebulun & Issachar] shall suck of the abundance of the seas, and of treasures hid in the sand.” (Deuteronomy 33:19) The applied for license area also includes the valley of Megiddo.    If Zion is extended the new license area, the company’s total area under license will grow to 400,000 acres.

In today’s letter to ‘Shareholders and Friends of Zion”, CEO Richard Rinberg also reported on progress with the company’s drilling contractor, Alladin Middle East: “On February 20, 2009, two senior executives from Aladdin Middle East Ltd (AME), in Turkey, visited our office in Dallas. We met with both AME’s Business Development Coordinator and Drilling Manager as, in September 2008, we contracted with AME to use their 2,000 horsepower drilling rig to drill our Ma’anit-Rehoboth #2 well. (You can see the location marked on the map diagram above.)

They informed us that they have now fully disassembled the drilling rig into eighty loads, in preparation for transit from Ankara to Israel. They told us that there is no shortage of vessels for shipping the rig to Israel and they expect, once the rig has cleared customs at Haifa Port, that they will require only nine days in which to rig-up (i.e. erect) the drilling rig.

Both Zion and AME have submitted all the crew documentation requested by the authorities in Israel; we now wait for confirmation that Israel has granted the Turkish crew worker permits. As soon as confirmation is received, the drilling rig will start its journey to Israel.” By the way: Zion stock closed at $17.27 today. Unbelievable. (See Genesis 12:3)

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