Israel’s Offshore Discoveries Fuel Tension

Russian news agency, Russia Today, reports on Israel’s recent oil and gas discoveries and international tensions with Lebanon over disputed territorial boundaries. Onshore, Russia Today, briefly reports on Givot Olam’s Rosh Ha’Ayin site but does not mention the Zion Oil & Gas exploration area or the Joseph Project.

Oh Christmas Tree!

Since the holidays are quickly approaching I thought I’d include a short article on Christmas trees. Normally, you’d think Christmas trees and Israel wouldn’t go together. But there’s a Christmas tree already up at Zion Oil’s Ma’anit-Rehoboth #2 site. It’s not green (it’s kind of a dirty gray) and it doesn’t have needles, but there are a good many valves.

The Ma’anit-Rehoboth #2 Christmas tree is installed on the wellhead. I’ll leave it to Wikipedia to explain why it’s there and what it does.

From: http://en.wikipedia.org/wiki/Christmas_tree_(oil_well)

Note that a tree and wellhead are separate pieces of equipment not to be mistaken as the same piece. For clarity, a wellhead must be present in order to utilize a Christmas Tree and a wellhead is used WITHOUT a Christmas Tree during drilling operations, and also for riser tie-back situations which would then have a tree included at riser top. Producing surface wells that require pumps (pump jacks, nodding donkeys, etc.) frequently do not utilize any tree due to NO pressure containment requirement.

Tree complexity has increased over the last few decades. They are frequently manufactured from blocks of steel containing multiple valves rather than made from multiple flanged valves.

The primary function of a tree is to control the flow into or out of the well, usually oil or gas. A tree often provides numerous additional functions including chemical injection points, well intervention means, pressure relief means (eg annulus vent), tree and well monitoring points (such as pressure, temperature, corrosion, erosion, sand detection, flow rate, flow composition, valve and choke position feedback, connection points for devices such as down hole pressure and temperature transducer (DHPT), etc.

When the operator, well, and facilities are ready to produce and receive oil or gas, valves are opened and the release of the formation fluids is allowed to flow into and through a pipeline. The pipeline then leads to a processing facility, storage depot and or other pipeline eventually leading to a refinery or distribution center (for gas).

A tree may also be used to control the injection of gas or water injection application on a producing or non-producing well in order to sustain economic “production” volumes of oil from other well(s) in the area (field).

On producing wells, injection of chemicals or alcohols or oil distillates to prevent and or solve production problems (such as blockages) may be used.

A typical sophisticated surface tree will have at least four or five valves, normally arranged in a crucifix type pattern (hence the endurance of the term “Christmas tree”). The two lower valves are called the master valves (upper and lower respectively) because they lie in the flow path, which well fluids must take to get to surface. The lower master valve will normally be manually operated, while the upper master valve is often hydraulically actuated, allowing it to be a means of well control while an actuated wing valve is normally the primary well remotely (from control room or control panel) controlled valve. Hydraulic tree wing valves are usually built to be fail safe closed, meaning they require active hydraulic pressure to stay open.

If you’re lucky enough to visit Zion’s well site one day, you’ll know why that complicated combination of valves and gauges is there and what it’s called – a Christmas tree!

Adira Energy Awarded Offshore License

(source: Scandinavian Oil & Gas Magazine)

AMG Oil says that the Israeli Petroleum Commissioner’s office has notified the Company that, during the most recent sitting of the Israeli Petroleum Board, the Company, through its wholly-owned subsidiary Adira Energy Corp., was awarded a second petroleum license in offshore Israel (the “Yitzhak License”).

Yitzhak License The Yitzhak License area is centered approximately 17 km off the Israeli coast and stretches from Netanya in the South to Hadera in the North (about 11 km). The Yitzhak License covers a total license area of 127,700 Dunam (approximately – 127.7 square kilometers or 31,555 acres). The Yitzhak License is directly to the North of, and contiguous to the company’s Gabriella License.

The license area is in shallow water with a depth of approximately 150 meters, which the Company believes will make drilling more cost efficient. The Yitzhak License has been granted for an initial period of three years commencing October 15, 2009.

Stephen Pierce, AMG’s Senior Vice President of Geology, said, “During early 1970 an oil well located in the area covered by the Yitzhak License called “Delta-1″ was drilled. The total depth of Delta-1 was 4423m, and ended in the Upper Jurassic. However, this depth is above the oil encountered in the Jurassic Bathonian age limestones in the Yam Yafo-1 (4894m – 4955m) and Yam-2 wells (5315m). It remains unclear as to why drilling stopped at this depth. However, the Delta-1 well was drilled in 1970 before the later discoveries of Yam Yafo-1 and Yam-2. Subsequent to Delta-1 being drilled, seismic mapping demonstrated a structural high extending from Delta-1 to the oil discoveries at Yam Yafo-1 to Yam-2. We believe that we have a good prospect that is an attractive target for hydrocarbon exploration.”

The Company’s successful application for the Yitzhak License expands AMG’s portfolio of petroleum licenses from its current two licenses (“Eitan” and Gabriella”) to include a prospective offshore area within a region that is known to host significant evidence of hydrocarbons.

AMG’s Chief Executive Officer, Ilan Diamond stated, “We are very pleased to have been successfully granted the Yitzhak License, the second block in the region. Both the Company’s offshore licenses, “Gabriella” and “Yitzchak” are within the broader region of the Nobel/Delek Tamar gas discoveries, which are 60 km west of Hadera (Dalit) and 90 km west of Haifa (Tamar). Evaluation work on our ‘Gabriella’ license has recently commenced and we are excited to continue work on this license. In addition, we continue to plan for the start of our exploration and drilling program on our “Eitan” license in the Hula Valley, northern region of Israel. We have completed the purchase of the drill rig and associated equipment, and are in the process of moving the rig to site. We have contracted the services of a full time drilling team who have significant experience operating rigs of similar nature and who have worked in the area previously.”

Zerah teams with Delek to expand Dead Sea oil exploration

GLOBES

Thu. October 15, 2009

Zerah teams with Delek to expand Dead Sea oil exploration: In 1995, a 2,000-meter well was drilled in the Halamish section, which found oil and gas.

Zerah Oil And Gas Explorations LP (TASE: ZRAH) is expanding its activity in the Dead Sea. The company has bought the 335-square kilometer Zurim license from Fore Group Ltd. subsidiary Ginko Oil Exploration Ltd., which abuts Zerah’s license. Delek Group Ltd. (TASE: DLEKG) units owns half of a 35 square kilometer section of the Zurim License, known as the Halamish section through Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L).

Zerah will pay for the Zurim license out of future revenue from oil or gas production, if any. Zerah will pay Ginko a 2.5 percent royalty of revenue and provide it a $2 million grant, provided that an independent expert determines that the oil and gas reserves in the license are worth at least $250 million. In addition, the Supervisor of Oil at the Ministry of National Infrastructures will have to declare a discovery at the license, and the partnerships’ revenue from a discovery at the Zurim license will exceed $100 million.

In 1995, a 2,000-meter well was drilled in the Halamish section, which found oil and gas. However, no production was carried out because the price of oil at the time rendered the discovery uneconomical.

The Halamish partners intend to drill a new well at the site, which is about five kilometers from Tzuk Tamrur 4 site, where Zerah and Delek are due to begin drilling a well this month. The 2,000-meter well will cost $4-5 million. A seismic study of the structure found a closed structure with 6.6 million barrels of good-quality oil, currently worth a gross value of $470 million.

Zion Oil Rights Offering Declared Effective

Globes Newswire October 13, 2009

DALLAS and CAESAREA, Israel, Oct. 13, 2009 (GLOBE NEWSWIRE) — Zion Oil & Gas, Inc. (Nasdaq:ZN – News) announced today that the registration statement for its previously announced common stock rights offering was declared effective by the Securities and Exchange Commission on October 9, 2009. The offering will be open to all holders of record on October 19, 2009 (the “Record Date”).

Under the terms of the rights offering described in the prospectus contained in the registration statement, Zion will distribute to each person who own shares of Zion common stock on the Record Date non-transferable subscription rights to purchase shares of Zion’s common stock. Each shareholder of record on the Record Date will receive 0.23 of a subscription right for each share of common stock owned on the Record Date. This is equivalent to twenty three (23) subscription rights for every one hundred (100) shares of common stock owned on the Record Date. The Company will not distribute any fractional rights; fractional subscription rights will be rounded up to the next largest whole number. Each whole subscription right entitles the holder to purchase one share of common stock at a purchase price of $5.00 per share.

Shareholders who fully exercise their rights will be permitted to subscribe for additional shares of common stock, if available, that were not subscribed for by other rights holders. The subscription rights are non-transferable. The aggregate amount of stock available in the rights offering is 3.6 million shares.

As soon as possible after the Record Date, Zion plans to mail to holders of its common stock (as of the close of business on the Record Date) a prospectus and other items necessary for exercising the rights. Shareholders who hold their shares in a bank or broker name will receive the rights offering material from their bank or broker. The prospectus will contain a description of the rights offering and other information. The subscription rights will be exercisable until the close of business on November 30, 2009, unless Zion elects to terminate the offering prior to the scheduled expiration date by giving two business days notice or unless Zion elects to extend the offering.

Noble Energy Declares Dividend, Stock Upgraded

PRNewswire-FirstCall

HOUSTON, Oct. 27

Noble Energy, Inc.’s (NYSE: NBL) board of directors today declared a quarterly cash dividend of 18 cents per common share payable November 23, 2009 to the shareholders of record on November 9, 2009.

Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company operates primarily in the Rocky Mountains, Mid-Continent, and deepwater Gulf of Mexico areas in the United States, with significant international operations offshore Israel and West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Visit Noble Energy online at www.nobleenergyinc.com.

Associated Press

10/26/09

Noble upgraded to “Outperform” on increased oil focus, future accelerated production growth

NEW YORK — Shares of oil and gas producer Noble Energy Inc. have been dragged down too far by the plunging value of its natural gas assets as natural gas prices have fallen, said an analyst on Monday as he upgraded the stock.

Noble Energy’s shares are positioned to rise as the company sheds natural gas properties and shifts its investments to crude oil, which has rebounded significantly in price over the course of the year, said RBC Capital Markets analyst Leo Mariani. The move will boost shares of the company, due to better economics, given the recent rebound in oil prices, which outshine lagging natural gas prices.

Mariani said in a research note released before the start of regular trading that Noble’s share price is too-severe a discount for a company that is shifting so much of its operations to oil. He upgraded his rating on Noble’s shares to “Outperform” from “Sector Perform” and raised his price target to $90 from $85.

Mariani expects that 41 percent of Noble’s 2009 production will be based on crude, but should increase to over 60 percent by 2013.

“Noble’s best economics are in deepwater Gulf of Mexico, West Africa and Israel regions, and we expect it to devote most of its capital to these crude-weighted regions.”

News Short – Zerah Oil Exploration

Jerusalem Post
Oct 27, 2009

Zerah Oil Gas Exploration fell 2.1%. The oil- and gas-exploration company said the start of drilling at the Zuk Tamrur 4 site, which had been scheduled for October, was postponed because of machine-order delays.

Zion Oil Begins ‘Completion Testing’ of Ma’anit Rehoboth #2

According to Zion CEO Richard Rinberg in last week’s ‘Zion Oil & Gas Newsletter’: “In the light of the uncertainty regarding the depth of the Permian geological layer at our well site and knowing that we have found seven zones that warrant completion testing, we decided that the prudent course, for the present, was to stop drilling on this well and (i) test the seven zones mentioned, as well as (ii) carry out further analysis on the geology, using the drilling and logging data obtained in the last weeks.”

With as many questions as I receive about Zion’s progress, there seems to be a general assumption that producing oil and gas is simply a matter of drilling a hole and letting the hydrocarbons bubble out … that’s what I thought. I’ve learned it’s more involved that that. With Zion Oil in the ‘completion testing’ phase of the Ma’anit-Rehoboth #2 well, now might be a good time to explain what that is and how a ‘hole in the ground’ becomes a producing well.

Most of text below comes from the United States Department of Labor website.

Once the design well depth is reached, the formation must be tested and evaluated to determine whether the well will be completed for production, or plugged and abandoned. To complete the well production, casing is installed and cemented and the drilling rig is dismantled and moved to the next site. A service rig is brought in to perforate the production casing and run production tubing. If no further pre-production servicing is needed, the christmas tree is installed and production begins.

Well completion activities include:

Conducting Drill Stem Test: To determine the potential of a producing formation, the operator may order a drill stem test (DST). The DST crew makes up the test tool on the bottom of the drill stem, then lowers it to the bottom of the hole. Weight is applied to the tool to expand a hard rubber sealer called a packer. Opening the tool ports allows the formation pressure to be tested. This process enables workers to determine whether the well can be produced.

Setting Production Casing: Production casing is the final casing in a well. It can be set from the bottom to the top. Sometimes a production liner is installed. This casing is set the same as other casings, then cemented in place.

Installing Production Tubing: A well is usually produced through tubing inserted down the production casing. Oil and gas is produced more effectively through this smaller-diameter tubing than through the large-diameter production casing. Joints of tubing are joined together with couplings to make up a tubing string. Tubing is run into the well much the same as casing, but tubing is smaller in diameter and is removable.

Starting Production Flow: Production flow is started by washing in the well and setting the packer. Washing in means to pump in water or brine to flush out the drilling fluid. Usually this is enough to start the well flowing. If not, then the well may need to be unloaded. This means to swab the well to remove some of the brine. If this does not work the flow might be started by pumping high-pressure gas into the well before setting the packer.

If the well does not flow on its own, well stimulation or artificial lift may need to be considered.

Beam Pumping Units: If the well doesn’t produce adequately, a beam pumping unit may be installed. There are four basic types of beam pumping units. Three involve a walking beam, which seesaws to provide the up and down reciprocating motion to power the pump. The fourth reciprocates by winding a cable on and off a rotating drum. The job of all four types is to change the circular motion of an engine to the reciprocating motion of the pump.

The explanation above depicts, very simply,  the completion program for most wells. Much more activity and many processes such as acidising, fracturing and nitrogen circulation may take place before the well is actually ready for production. My goal was to let you know the kind of activities that must take place before a ‘hole in the ground’ becomes a well.

When we built our house I was so excited when the framing and the roof were complete; when the contractors installed the siding and I saw the house from the outside I thought, “Wow, this baby is just about finished!” I had no idea how much time and work was involved in building the inside of the house.

I’m learning that ‘building’ an oil well is similar. There’s a lot more to it than the hole. Zion Oil is in the middle of ‘down-rigging’ now; they’re disassembling the drilling rig at the Ma’anit-Rehoboth #2 so they can move it to the Elijah #3. While they work on ‘building the inside of the house’ at the Ma’anit-Rehoboth #2, they’ll begin work on the ‘outside of the house’ at the Elijah #2 site. That’s goods news!

Zion Logs the Ma’anit Rehoboth #2

Last week, Zion Oil conducted logging operations (gathering data inside the wellbore) down to a depth of 17,040 feet. Results from the logging operations will help Zion geologists determine if and where potential hydrocarbons exist in the well and how to proceed with drilling or possible production.

Below is a synopsis of last week’s efforts by Zion CEO Richard Rinberg:

An important part of our geological work during drilling is to continually examine the rock cuttings from the well bore (brought up to the surface by the circulating drilling mud) and match that physical evidence against the ‘expected’ rock cuttings. In our database of scientific information, we maintain a computer model of the expected rock strata.

As more information is gathered, the computer model is amended and in the event of a material difference between the ‘actual’ and the ‘expected’, it may be highly desirable to obtain further information by ‘logging’.

You may remember (from our previous logging) that the definition of ‘logging’ is: ‘to test and evaluate the well, using electrical wireline well logs’.

The ‘sonde’ is lowered down the hole on a ‘wireline’ and various measurements are recorded.

The ‘sonde’ is a cylinder filled with instruments that can sense the electrical, radioactive and sonic properties of the rocks (and their fluids) and the diameter of the wellbore.

The ‘wireline’ is an armored cable with steel cables surrounding conductor cables in insulation. It is reeled out from a drum in the back of the logging truck.

The data from the sonde is transmitted up the cable to instruments in the logging truck and recorded.

Using state-of-the-art Baker Atlas logging equipment, we are able to obtain very high-quality data. This past week, we logged an interval of approximately 500 meters; from a depth of approximately 4,825 meters down to approximately 5,325 meters.

The logging will enable us to make decisions based on scientific evaluation rather than hunches and guesstimates.

So, this past week, we are still at a depth of approximately 17,470 feet (5,325 meters), close to our final target of approximately 18,040 feet (5,500 meters).

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

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