1.5 Billion Barrel Oil Discovery in Israel?

News reports out Israel of a 1.5 billion barrel oil discovery lit up websites and news postings yesterday. Israeli oil exploration company Givot Olam announced to the Tel Aviv Stock Exchange (TASE) on Tuesday that, “Production test drilling at Givot Olam’s Meged 5 site near Rosh Ha’ayin indicated it holds 1.525 billion barrels’ worth of oil.” And boy did it start a stir!

Givot Olam stock shot up 69% at one point, before finally settling out at a 19.7% gain … meanwhile trading was suspended and the Israel Securities Authority demanded clarifications of the report from Givot Olam – who didn’t have anything to add.  They said a full report would be available in September.

According to Israeli newspaper Haaretz, “This is not the first time Givot has issued partial and less than definitive information.” If you visit the Givot Olam website (http://www.givot.co.il/english/index.php) today you’ll read about the 2 billion barrels they “discovered” (but never produced) in 2004.  The truth behind this week’s “discovery” is that their tests don’t show how much oil they can produce or how much the discovery may be worth financially. What they do know is that even if there is 1.5 billion barrels down there, only a small percentage of it is recoverable; estimates range from 10% to 25%.

Givot Olam has been pumping oil mixed with gas and water from the Meged 5 test well for about a week and a half, averaging about 380 barrels per day. Israel consumes 235,000 barrels of oil per day. At the rate the Meged 5 is pumping now the well would supply less than two tenths of one percent of Israel’s daily consumption. If just 10% of Givot Olam’s “discovery” was recoverable (150 million barrels), the Meged 5 would have to maintain its current pace for over a thousand years to harvest the field. Israel burns through 150 million barrels in less than two years.

Haaretz reports: A geophysicist in the field, however, called the most recent announcement “speculative” and said the 1.525 billion figure appeared “exaggerated.”

“The bottom line is that I want to see the well’s capacity of barrels per day over time,” he said. “How much the drilling site can produce – that’s what will answer questions regarding its economic viability. Regarding the reserves, I don’t think they can be assessed at the moment. It’s a very rough estimate and everything gets into the range of probabilities.”

That’s what the geophysicists in Israel (the guys who know) are saying. It’s the same thing they told me after Givot Olam announced its 2 billion barrel “discovery” in 2004.

Bottom Line: Givot Olam’s announcement of a 1.5 billion barrel discovery is highly speculative and most likely exaggerated. A “discovery” doesn’t mean how many barrels a company can actually commercially produce (2004’s 2 billion barrel “discovery” commercially produced exactly zilch). We’ll need to wait until Givot Olam submits their definitive report in September and watch production on the Meged 5. Yesterday’s announcement created a lot of hoopla, but nobody, including Givot Olam, knows the substantive reality of the “discovery” at this point.

But that didn’t stop some Israeli news agencies and  Christian websites (Joel Rosenberg’s included) from running the headline “1.5 BILLION BARRELS OF OIL DISCOVERED IN ISRAEL” with few, if any, facts to back up the headline.

So why am I raining on everyone’s parade? Here’s why: the truth. There’s nobody that believes Israel will discover oil in a big way more than I do (except maybe John Brown of Zion Oil and Tovia Luskin of Givot Olam). And I believe the Bible (Torah) points to that discovery (so do John Brown and Tovia Luskin). But sensational headlines taken from unsubstantiated announcements don’t forward the search. When sensational headlines (like the 2 billion barrel “discovery” in 2004) don’ t pass the test of reality, they only disappoint the folks who believed them in the first place and hurt the credibility of those who ran the headline. That  said, here are the facts:

• The Bible (Torah) states that Jacob (Israel) would “suck honey out of the rock, and oil out of the flinty rock.” (Deut 32:13) Of Joseph (Ephraim and Manasseh) it states: “Blessed of the LORD be his land, for the precious things of heaven, for the dew, and for the deep that coucheth beneath, And for the precious fruits brought forth by the sun, and for the precious things put forth by the moon, And 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 and fulness thereof …. (Deut. 33:13-16).  That Zebulun and Issachar “shall suck of the abundance of the seas, and of treasures hid in the sand.” (Deut 33:19) And that Asher would “dip his foot in oil.” (Duet 33:24)
• Tovia Luskin and John Brown founded their oil exploration companies based on their belief that scripture points to a major oil discovery in Israel.
• Zion Oil & Gas and Givot Olam have proven that oil exists deep below the territories the Bible (Torah) said it would be found.   Givot Olam has pumped more than 3,000 barrels of it in the last week and a half.
• Serious geological studies by the Geophysical Institute in Israel and the US Geological Survey have backed up Luskin’s and Brown’s belief by stating that they estimate a mean of 1.7 billion barrels of oil and 122 trillion cubic feet of natural gas are recoverable in the Levant Basin, which includes onshore and offshore Israel.
• Enough natural gas to supply all of Israel’s needs into the foreseeable future has already been discovered off the coast of Northern Israel.

The facts are enough. Israel has discovered huge quantities of natural gas, they’ve discovered oil right where the Bible said it would be, and I believe Israel is on the cusp of discovering major quantities of producible oil, both onshore and offshore – enough to supply them into the foreseeable future.  It’s happening now, but it hasn’t happened yet. The prophecy of Israel’s oil, I believe, is being fulfilled before our eyes, but it hasn’t been fulfilled yet. Misleading headlines aside, Givot Olam’s discovery is a part of that fulfillment. I’ll report the facts to you as we see them unfold. In the meantime here’s a more balanced article on the subject from the Israeli newspaper Haaretz: http://www.haaretz.com/print-edition/business/givot-olam-meged-has-1-5b-barrels-of-oil-1.308683

Steve Spillman

Zion Oil Concludes Field Seismic Acquisition

Zion Oil & Gas has successfully concluded acquisition of field seismic in both their Asher-Menashe License and Issachar-Zebulun Permit areas. The raw data is now being processed for interpretation, both in Israel and in Houston, Texas.

On June 16, 2010, field acquisition of new 2-dimensional seismic in the Jordan River Valley section of Zion’s Issachar-Zebulun permit area was successfully concluded.  Approximately 30 km of new seismic data was collected on Zion’s behalf by the Geophysical Institute of Israel (GII).

According to Zion CEO Richard Rinberg, “I am pleased to report that the data acquired does seem to be of good quality. This was not easy to achieve, as in the Asher-Menashe license area, there are some major roads. One night, we arranged for the police to stop the flow of traffic, so that the traffic ‘noise’ would not affect the seismic acquisition.

“Even with the latest computer technology, the data processing will take a number of weeks to produce results and then the resulting information will need to be carefully built into our geologic computer model by Zion’s geologists. As a result, we should be able to have a much better picture of any geologic structures under our exploration areas and therefore make better decisions regarding our future exploration plans.”

This data is now being “processed” by a geophysical consultant in the United States into usable graphic imagery that can then be “interpreted” by Zion geologists in their investigation for future drilling prospects.  The processing and interpretation of this data is expected to be finalized by October 2010.

‘Field seismic’ or ‘seismic reflection’, according to Wikipedia, is a method of exploration geophysics that uses the principles of seismology to estimate the properties of the Earth’s subsurface from reflected seismic waves. The method requires a controlled seismic source of energy, in this case, trucks equipped with seismic vibrators, commonly known by the trademark name Vibroseis. By noting the time it takes for a reflection to arrive at a receiver, it is possible to estimate the depth of the feature that generated the reflection. In this way, reflection seismology is similar to sonar and echolocation.

Zion Oil & Gas and other exploration companies use this seismic reflection technology to ‘see’ possible hydrocarbon bearing structures below the earth’s surface by ‘interpreting’ the reflected seismic data.

Givot Olam Drills Successful Oil Well

Israel drills successful oil well

JERUSALEM, June 16 (UPI) — Israel’s Givot Olam Oil Exploration said its drilling explorations at its Meged 5 well near Rosh Ha’Ayin have been very successful.

As a result of the initial operations, Givot Olam Oil Exploration is returning its hydraulic fracturing equipment to its foreign suppliers, Globes reported Wednesday.

Since the Rosh Ha’Ayin test bore produced oil mixed with gas instead of a water flow the bore, Givot Olam Oil Exploration Director Shmuel Becker told journalists, “We’re returning the (hydraulic) frac(turing) equipment because there is natural oil flow in the well.”

Givot Olam Oil Exploration reported that the test bore produced an oil flow of 302 barrels over nearly 20 hours. Following expert analysis, based on the test bore site’s natural oil flow from the Meged 5 well, Givot Olam Oil Exploration decided to dismantle the hydraulic fracturing and propelling equipment at the wellhead and send it back overseas.

In light of the Meged 5 bore hole success, Givot Olam Oil Exploration has begun preparations for tests of section 6 of the well.

Lebanon Speaker Urges Fast Action on Offshore Gas Reserves

(AFP) BEIRUT — Lebanese parliamentary speaker Nabih Berri on Wednesday urged his government to begin exploring offshore natural gas reserves, warning that neighboring Israel planned to lay claim to the prospective resources.

“Lebanon must take immediate action to defend its financial, political, economic and sovereign rights,” said Berri, who has submitted a bill to launch exploration of potential offshore reserves.

“Exploring our options in this field is our best bet to pay off Lebanon’s debts,” he told reporters.

Lebanon’s national debt, among the highest in the world, currently stands at more than 50 billion dollars (41.6 billion euros), equivalent to some 148 percent of GDP.

“Israel is racing to make the case a fait accompli and was quick to present itself as an oil emirate, ignoring the fact that, according to the maps, the deposit extends into Lebanese waters,” he said.

In a statement on its website, Norway-based Petroleum Geo-Services recently announced it had explored Lebanese waters which contained “valuable information” on potential offshore gas reserves in coordination with the Lebanese energy and water ministry.

And US-based Noble Energy said on its website that it had discovered enough natural gas at the Israeli Tamar and Dalit offshore fields to meet Israel’s needs for years.

It also announced the Leviathan prospect, offshore Israel in the Rachel and Amit licenses, as its next planned exploration target in the region in the fourth quarter of 2010.

Lebanon and Israel remain technically in a state of war and have no diplomatic ties.

Givot Olam’s Meged #5 Produces Oil

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May 31, 2010
Givot Olam Oil Exploration LP (TASE:GIVO.L) announced plans to frac (pumping special fluids into the well bore to create enough pressure to crack or fracture a target formation within the well) section 1 of the Meged 5 well near Rosh Ha’Ayin, Israel, in order to stimulate oil production. Company officials stated that the necessary equipment and team were already in Israel, and that it had begun the preliminary activity for the procedure.

On May 27 Givot announced that the production test in Section 1 of its Meged 5 well yielded 33 barrels of liquid over eight hours, without the aid of accelerants.

The previous week Givot released a detailed report for the production tests, including the timetable. The tests will be conducted in eight sections of the well over 60-80 days. Givot has promised to issue a detailed report on the number of barrels of oil flowing at each section and the length of time of the flow, but cautioned that no conclusion could be drawn from these figures and implored investors to wait for the conclusion of the tests.

Givot said, “The partnership wishes to reiterate that data of these kinds do not reflect the rate of flow from the well or its viability, which will only be determined after completion of the tests by the experts who will process and analyze the date obtained from each of the tests, which will be disclosed in separate immediate notices.”

Givot has apparently learned the lesson of the Zerah Oil And Gas Explorations LP (TASE: ZRAH) at its Tamrur Cliff 4 well. A gas flare from the well caused investors to rush to buy the share, sending it skyrocketing. The share later crashed on disappointing production tests results. Givot is seeking to avoid a similar experience.
Excerpted (with editing) from: http://www.globes.co.il/serveen/globes/docview.asp?did=1000563138&fid=1725 and http://www.globes.co.il/serveen/globes/docview.asp?did=1000562385&fid=1725.

Israel Considers Upping Oil & Gas Royalties

US pressures Israel over potential change in oil, gas tax policy

Jerusalem (Platts)–21May2010/638 am EDT/1038 GMT

The US has expressed concern about a possible change in Israel’s tax policy for the upstream oil and natural gas sector, with White House officials and US senators having brought the matter up with the office of Prime Minister Benjamin Netanyahu, according to sources from both countries.

The Israeli finance ministry last month announced the establishment of a committee to study various options, including raising taxes and royalties. The current level of royalties is 12.5%.

The concern is that a change in tax policy would affect US company Noble Energy, which is involved in the Tamar and Dalit discoveries off Israel’s northern Mediterranean coast, the sources said.

The committee will present its recommendations to the ministry by August.

Prime Minister Netanyahu has put pressure on the finance, national infrastructure and justice ministries to limit the scope of the committee to deal solely with future licenses and not existing ones.

But the sources said a particular concern is that finance minister Yuval Steinitz did not state clearly that the committee would refrain from discussing retroactively increasing royalties on current leases and natural gas discoveries, including Tamar.

According to Israeli press reports, a senior US diplomat based in Tel Aviv wrote a letter to the finance minister warning that unless current leases and licenses are exempt from the scope of the committee’s recommendations, it could be undermine confidence in the stability of Israeli fiscal policy and deter international investment.

Finance minister Steinitz said at the time of the establishment of the committee that the substantial discoveries of natural gas and the possibility of future finds require the Israeli government to review its fiscal policy, which was implemented back in 1952, to determine whether it is still suitable.

He said the committee would study all aspects related to the taxation of the oil and gas exploration industry and compare it with that of other Western countries.

The finance minister said it would be up to the committee to propose a fiscal policy for the oil and gas industry for the future.

The committee will be headed by Hebrew University economist Eytan Shishinsky and will include government officials.

In March, Noble Energy chairman and CEO Charles Davidson said he hoped that the Israeli government would not change its current policy.

“This would be a great mistake and send the wrong message to exploration companies,” Davidson said.

He noted that it would lead to higher costs at a time when oil and gas exploration in Israel is still in its infancy.

In February, the Knesset (parliamentary) economics committee began hearings on changing the country’s oil law in order to increase royalties paid to the state from oil and gas discoveries.

Knesset member Carmel Shama of the ruling Likud party said he planned to present an amendment to the current law aimed at increasing the participation of the state in the revenues of gas producers, but said it would not affect existing licenses.
–Neal Sandler, newsdesk@platts.com

USGS Says Israel Has 1.7 Billion Barrels of Oil

The United States Geological Service released a report last week on Israel’s Levant Basin, stating that the area contains 1.689 billion barrels of undiscovered oil and 122.4 trillion cubic feet of undiscovered natural gas. The Levant Basin lies both onshore and offshore and includes most of middle and northern Israel and coastal Lebanon and Syria. The basin includes the exploration areas of Noble Energy offshore and Zion Oil & Gas onshore.

Although the USGS released its report just last week, most of the data it contained came from research conducted between 2000 and 2008 by Dr. Michael Gardosh, a researcher at the Geophysical Institute of Israel, and Dr. Yehezkel Druckman, who until a few years ago was Petroleum Israel’s Commissioner. Dr. Druckman now serves on the Zion Oil & Gas Board of Directors.

Click here to download the USGS report.

Arab Murmuring Over Israeli Gas Already Begun

Most of the people following the story of Israel’s recent off shore gas discovery and possible onshore oil discoveries see idea of Israel as energy independent and economically prosperous as  a good thing. At least that’s the assumption. But not everyone sees Israel’s independence and prosperity as a plus – especially her neighbors.

If the Arab world views Israel (without hydrocarbon resources) as a worrisome usurper and unwelcome squatter today, an economically and energy independent Israel certainly won’t reduce fear and loathing of it’s Jewish neighbor.

It’s easy to predict an Arab response to a massively successful hydrocarbon industry in Israel. If the Jewish State is viewed as a usurper now, the natural response would be that if the land (and the sea) doesn’t belong to Israel, then neither does its natural resources. It’s an issue today; when economic quantities of oil and gas come into play it becomes the issue.

It’s no surprise that the Arab world will cry foul when Israel becomes energy independent,  I just didn’t expect to see signs of it this soon. The excerpts below are from a March 11 article in Abu Dhabi’s newspaper, ‘The National’, written by Dubai-based energy economist Robin M Mills. The piece itself sounds well written and even handed … from an Arabist perspective. The general tone of the article , unsurprisingly, paints Israel as an aggressor and exploiter of the Palestinian people. If this apparently reasonable, thoughtful Arabist response predicts political storm clouds from Israel’s oil and gas success, you can imagine what a more radical response might be.

From “Israel’s new gas fields will do little for peace” by: Robin Mills

“Middle Eastern country finds large gas reserves. In our hydrocarbon-rich region, this would hardly be news, were it not for the identity of the country: Israel.
Golda Meir, the former Israeli prime minister, used to joke that Israel was the only place in the Middle East without oil. But in January last year, the US company Noble Energy found gas in the Mediterranean: not as good as oil, but a valuable second prize. More recent drilling confirms it is a giant discovery, probably just the first of several.

Suddenly, Israel can look forward to independence from energy imports, a cleaner environment, maybe even earnings from gas exports. But in this troubled region, such a bonanza is not likely to bring benefits to the Palestinians, nor peace. It may even contribute to further conflict (my emphasis) ….

… In a happier situation, these discoveries would be a driver for regional economic integration. Some gas could go to energy-poor neighbours and Israel could join the Arab Gas Pipeline that runs from Egypt up to Syria, and ultimately on to Turkey and Europe.

In such an unstable area, of course, these initiatives are impossible. In reality, any significant exports would be as LNG to Europe, bringing no benefits to neighbouring states.

Tamar has ramifications far beyond business and economics. Earnings from gas would make Israel more able to resist international pressure or boycotts over human rights and peace negotiations, and to weather any reduction in US aid. A secure domestic energy source avoids the need to look to Egypt, where recent legal action has sought to block gas exports to Israel.

Palestinians will feel they have some claim on this gas, but they are unlikely to gain anything from it. The people of Gaza can feel particularly aggrieved. In 1999, the British company BG found a large field offshore Gaza, enough to provide power to all Palestinians for a decade and more, but this gas has never been developed. Indeed, the former Israeli prime minister Ariel Sharon stated that Israel would never buy gas from the Palestinians because it had no intention of giving Hamas a source of revenues.

For the Israelis to exploit this gas themselves would be illegal under international law, and forbidden by the Oslo Agreement. They might have chosen to ignore the diplomatic consequences, but with the discovery at Tamar they can afford to leave Gaza’s gas lying idle indefinitely. In the meantime, Gazans face daily eight-hour electricity blackouts.

Tamar itself appears to lie within Israeli waters. However, with no peace agreement and hence border demarcation between Israel and Lebanon, there is always the possibility of new fields being uncovered in disputed areas, at a time of increasing speculation about an Israeli attempt to settle scores with Hezbollah. …

… This episode is a reminder that, in themselves, oil and gas are neither a blessing nor a curse. Everything depends on what is done with them. In this troubled region, Tamar brings benefits only to Israel, and it has the tragic potential to encourage Israeli intransigence.

In the absence of real progress towards peace, gas discoveries cannot be a force for regional prosperity. In the current circumstances, the best that Israel’s neighbours can do is to try to emulate its success.

For the full article go to: http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100312/BUSINESS/703119913/1050

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.

Bontan Announces Two More Huge Israeli Gas Fields

Canada’s Bontan Corporation Inc. (Bulletin Board: BNTNF) subsidiary Bontan Oil and Gas Exploration today announced that its Mira and Sarah prospects offshore from Israel have up to 6 trillion cubic feet of natural gas, worth up to $7.54 billion, at current prices.

The Mira and Sarah prospects are located just south of the Tamar and Dalit prospects, where Delek Group Ltd. (TASE: DLEKG) and its partners, Noble Energy Inc. (NYSE: NBL), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) unit Dor Alon Energy Exploration Ltd found natural gas last year, which some sources estimate to be worth up to $40 billion. The prospects are north of Yam Tethys’ Mary prospects offshore from Ashkelon, BG Group plc’s (NYSE; LSE: BG) undeveloped fields offshore from Gaza, and East Mediterranean Gas Co. (EMG) fields offshore from El Arish in Sinai.

Bontan’s prospects are just north of the Gabriella prospect, which Modiin Energy LP (TASE:MDIN.L) acquired 70% of from Canada’s Adira Energy Corporation (XETRA: AORLB8; Bulletin Board: AMGOF) subsidiary Adira Energy Israel Ltd. last week.

The Evaluation Report prepared by Chapman Petroleum Engineering Ltd. estimates that the Mira prospect has 3.03-5.45 trillion cubic feet of gas, with the best estimate of 4.24 trillion cubic feet. The Sarah prospect has 1.05-1.89 trillion cubic feet of gas, with a best estimate of 1.47 trillion cubic feet.

According to Chapman, the present value of gas in the Mira prospect is $2.54-5.37 billion, with $3.96 billion as the most likely amount. The value of gas in the Mira prospect is $1.02-2.17 billion, with $1.59 billion as the most likely amount. The probable value of the gas at the two prospects is $5.55 billion.

Bontan indirectly owns 71.625% of the Mira and Sarah prospects through its 75% stake in Israel Petroleum Company, which owns 95.5% of the drilling licenses.

Chapman concludes, “Based on our analysis, after consideration of risk, we have concluded that the potential of these prospects is of sufficient merit to justify the work program being proposed, and we therefore recommend and support the company’s participation.”

The Mira and Sarah Drilling Licenses are adjoining 154-square mile blocks located 50-100 kilometers offshore from the Netanya-Hadera area. No exploratory drilling has been done on either block to day. A 3D seismic survey was completed on both blocks in late 2009 and is currently undergoing analysis.

Bontan CEO Kam Shah said, “The company is very pleased with the results of the Evaluation Report on these offshore Israeli prospects. This independent technical assessment confirms that these exploration blocks are indeed world class assets and completely justify the company’s investment of time and capital in this highly significant project. A review of global exploration discoveries in 2009 just published by the American Association of Petroleum Geologists also reported that the recent offshore Israel natural gas discoveries were among the most significant in the world. This independent technical report places the company’s prospects in the same geological setting as the 2009 offshore Israel discoveries. Our next step is the completion of the processing and interpretation of the 3D geophysical survey acquired over the Mira and Sarah drilling licenses. Firm drilling locations can then be selected on both prospects and application made to the Government of Israel to commence an exploratory drilling program.”

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