Fueling Israel’s Future

From: Jewish Ideas Daily, Alex Joffe, July 21, 2011

Are abundant natural resources a blessing, or a curse? This is the sort of question that economic theorists love to play with, usually concluding that, depending on other factors, they can be either or both. Israel, thus far burdened with a crippling dependency on imported oil and gas, has had astonishing success in developing its human resources—so much so that it has flourished economically even in the current global recession. Would it have done even better with adequate sources of domestic energy? Or worse? A formerly theoretical dilemma is poised to become a pressingly practical one.

Trillions of cubic feet of natural gas have been discovered in several titanic fields off Israel’s coastline. They promise both an abundance of domestic energy, as much as 200 years’ worth by some estimates, and the possibility of the country’s becoming a major energy exporter. The total value of the gas is currently worth close to a half-trillion dollars. On the macro level, and from the point of view of ensuring the country’s national security, the prospective boon is almost unimaginably beneficial. The question, as always, is what is entailed in realizing it, and how to mitigate any attendant social and political costs.

Begin with the issue of where to locate a gas terminal. Israel’s coastline is 170 miles long, the site of several cities and numerous competing uses, including ports, water-desalinization and sewage-treatment plants, military operations, and recreation. Thanks in part to ecological changes in the Nile delta (themselves the long-term effects of the Aswan high dam built in the early 1960s), the coastline is also being eroded and becoming more vulnerable to storm damage. Millions of Israelis, Jews and Arabs, vie for access to the few parks and undeveloped beaches on the seafront.

One pressing issue is strategic. Gas-receiving terminals include the infrastructure to process raw natural gas and remove contaminants, as well as storage tanks and links to distribution systems. They may also include facilities to create liquefied gas for transportation and storage by radically reducing its volume. Such facilities have the explosive potential of small nuclear weapons. In Israel’s case, any such facility will also automatically become a major target for adversaries ranging from Hamas to Iran. Already the single pipeline carrying natural gas from Egypt to Israel and Jordan has been repeatedly attacked since the fall of the Mubarak regime, and the electrical-power stations at the two coastal towns of Hadera and Ashkelon have been targeted by, respectively, Hizballah and Hamas rockets.

If the strategic implications of locating a gas terminal are significant, the domestic aspects are almost equally problematic. One plan would have placed the terminal at Dor, just south of the Hadera power station, effectively cutting through a beachfront kibbutz, nature reserve, and major archaeological site. Another proposal would expand the existing gas terminal at Ashdod, which serves a smaller offshore field. In both cases, those affected would be among the less powerful sectors of Israeli society, kibbutzniks and residents of outlying cities. (For both strategic and domestic reasons, there is no chance the terminal will be located anywhere near north Tel Aviv or its affluent suburbs.) And in both cases the sites have already been targeted by rockets.

More recently a proposal has emerged to locate a floating liquefied natural-gas terminal a few miles off the shore of Hadera, in what would amount to a giant ship that could temporarily move out of range of missile and other security threats. Australia is building a similar facility 120 miles off its western coastline, at a cost of $10 billion. In Israel, the state will of course remain responsible for its citizens’ security, but the size of the price tag inevitably raises the vexing question of who will pay for the infrastructure, and who will enjoy the proceeds.

The Israeli and American companies that have invested hundreds of millions for exploration stand to reap a windfall of billions. In January, the Israeli cabinet overwhelmingly approved taxing oil and gas profits at between 50 and 62 percent, effectively doubling the tax rate under which exploration had been launched. The new rates are in line with those in most Western countries, but the change prompted a complaint from the U.S. State Department about the deleterious retroactive effect on American investors. For their part, some Knesset members have been railing angrily about “greedy tycoons.” Prime Minister Benjamin Netanyahu has promised that the state’s share will be allocated toward education and security, but these debates can only become more heated, and more polarized, as time goes on.

No less fraught are the regional and international implications. Israel’s gas discoveries have prompted negotiations with Cyprus regarding the delineation of the two countries’ maritime borders and exclusion zones. Some entrepreneurs are talking about an undersea pipeline heading toward Europe. And, as has been well reported, there have been threats from Lebanon, which has already accused Israel of stealing “its” offshore natural gas.

Just south of the national park at the imposing ruins of Roman and Byzantine Caesarea, including the remains of the ancient aqueducts that supplied much-needed fresh water, and of the modern town of Caesarea that is home to some of Israel’s elite citizens, lies the Hadera power station. Its smokestacks dominate the horizon; a jetty protrudes offshore to carry coal from cargo ships.

The view from Caesarea beach thus already offers a juxtaposition of old—very old—with new infrastructure, as well as of the conflicts and divides that characterize Israeli society internally and its relations with its neighbors without. One can only hope that, with agility and political wisdom, the Jewish state will successfully navigate its course between the blessing and the curse of immense amounts of fuel, and the forms of power that come with it.

Alex Joffe is a research scholar with the Institute for Jewish and Community Research.

Jackpot! Israel on Cusp of Energy Revolution

Julie Stahl, CBN News Mideast Correspondent

JERUSALEM, Israel — Unrest in the Middle East is threatening Israel’s energy supply.

But recent natural gas discoveries and extracting oil from shale could make the country energy independent just in the nick of time.

Energy Breakthrough?

Some are calling it a potential energy revolution.

Off the coast of Israel in the waters of the Mediterranean Sea, explorers have found what is being called the largest offshore gas reserve in the world and the biggest find in a decade.

The discovery is a major development because Israel has long been the one Middle East country without its own oil and gas resources.

“The joke was ‘Why did it take Moses 40 years to bring the people of Israel from Egypt to Israel? Because he looked for the only place in the Middle East that lacked oil and gas,’” said Gideon Tadmor, CEO of Delek Energy.

“So that was the joke. But we proved the joke to be wrong, and actually we know that Moses brought us to the right place,” he added.

Delek Energy and its American partner, Noble, are behind the discoveries that will start producing natural gas for customers in 2015.

Energy expert and former CIA director James Woolsey says the gas fields make Israel energy independent.

“They’re extraordinarily important and strategically very advantageous I think for Israel,” Woolsey told CBN News.

Shale Oil

In addition to natural gas, it appears the Jewish state is also rich in oil shale– a fine-grained rock which can be used to produce oil through a special process.

Harold Vinegar, chief scientist with Israel Energy Initiatives, says the amount of oil shale buried here might equal the oil reserves of Saudi Arabia.

“We think it’s conservatively estimated at about 250 billion barrels of oil contained in the Israeli oil shale – probably the second or third largest deposit in the whole world,” Vinegar said. “And it has a tremendous potential to make an oil industry here.”

Experts say there’s enough oil shale to produce at least 50,000 barrels of oil a day – enough to meet Israel’s military and civil aviation needs for 25 years.

Israel Energy Initiatives is now performing quality tests.

Vinegar, who was also a chief scientist for Shell, says the samples indicate the oil quality to be very high before it’s even refined.

As the world population increases, so will the demand for crude, and that will push up the price.

In response, countries like Israel that import most of their energy will have to develop unconventional resources like oil shale.

“There’s nothing scarier than running out of energy,” Vinegar said. “I mean, wars have been fought entirely for oil. And so this is something we feel we’re doing for Israel, which is to develop the oil shale here.”

If his group’s plans work out, the land of Israel will hold even more promise for the future.

Zion Oil Annual Meeting Highlights

Zion Oil & Gas held its Annual General Meeting (AGM) in Dallas on June 21. Zion CEO Richard Rinberg’s report included the year’s exploration highlights:

• In July 2010, we completed a rights offering, raising over $12 Million.
• Late in August 2010, we began drilling operations on the Ma’anit-Joseph #3 well, within the Joseph License.
• In December 2010, we completed a rights offering, raising over $18 Million.
• In April 2011, we were awarded a new petroleum exploration license on land within Zion’s previous (and now expired) Issachar-Zebulun Permit area. We named the new license the Jordan Valley License.
• The difference between a Permit and a License is that with a Permit you can investigate the hydrocarbon potential (including shooting field seismic), but you cannot drill a well; with a License you may drill one or more wells.
• Just last week, we requested the grant of a new petroleum exploration permit area, adjacent to Zion’s Joseph License area – named by us  the Asher-Joseph Permit.
• So, in addition to the exploration areas we currently hold, we have three applications for new exploration areas pending before the Israeli Petroleum Commissioner’s Office: the Asher-Joseph Permit, the Zebulun Permit and the Dead Sea License.
• Last week also saw the milestone of us reaching our target depth of approximately 19,357 feet (5,900 meters) in drilling the Ma’anit-Joseph #3 well into the Permian geologic layer in Northern Israel. After reaching the target depth, we logged the well.

Company President and COO, Bill Ottaviani shared in his Operations Report on Zion’s exploration territory: “During the past 12 months, we have increased our potential exclusive exploratory acreage position by about 60% to around 530,000 acres. This increase assumes that Zion will be granted all the permits and licenses already submitted to Israel’s Petroleum Commissioner’s Office but not yet decided upon. While there is no guarantee that we will receive any or all of the new areas requested, based on our track record of being a responsible operator, we are optimistic that the Commissioner’s Office will look favorably upon our applications.

Victor Carrillo, Zion’s Executive VP, Presented a history of Israel’s search for (and discovery of) oil and gas, and Zion’s role in the country’s exploration efforts.

All of these presentations can be viewed or downloaded from Zion’s website ‘Investor Center’.

Zion Oil Founder and Chairman John Brown closed the annual meeting by reading a passage from the New Testament letter to the Hebrews: “So don’t throw away your confidence, it will be richly rewarded. You need to persevere so that when you have done the will of God, You will receive what he has promised.” (Hebrews 10: 35, 36)

Israel’s Sara, Myra May Hold 6.5 Trillion Cubic Feet of Gas

Bloomberg June 30, 2011

Holders of the Sara and Myra exploration licenses off Israel’s Mediterranean coast said today that a seismic survey showed they may hold 6.5 trillion cubic feet of natural gas.

“This is an excellent report for us and for the energy sector,” Ohad Marani, the chief executive officer of Israel Land Development Co. Energy Ltd., said at a conference in Tel Aviv. The average probability associated with the results is 54 percent, he said.

The results for Sara and Myra follow other gas finds off Israel since 2009, including the Tamar and Leviathan discoveries that together hold an estimated 25 trillion cubic feet. The finds are sufficient to meet Israel’s domestic needs eventually and enable it to export gas, industry executives and government officials have said.

“Its always exciting to find natural resources,” said David Kaplan, a Tel Aviv-based energy analyst at Barclays Plc. “The government has shown concern about having an effective monopoly on natural gas and none of the partners in Sara and Myra are partners in Tamar.”

Tamar partnership companies fell in Tel Aviv trading. Isramco Negev 2 LP dropped 0.7 percent to 0.42 shekels at 12:41 p.m. Avner Oil Exploration LLP (AVNRL) declined 2 percent to 2.03 shekels. Delek Drilling LP lost 1.5 percent to 11.31 shekels.

Kaplan noted that Tamar is already being developed and may produce gas by 2013, while Sara and Myra are still targeted prospects rather than discoveries. “In the best case scenario, where everything goes perfectly, the first product may be two to four years from now,” he said.

Israel Land Energy fell 8 percent in Tel Aviv today after rising 13 percent yesterday on press reports of the estimates. Modiin Energy Ltd., another partner in the licenses, retreated 8.1 percent after gaining 8.8 percent in the previous session.

To contact the reporters on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net; Gwen Ackerman in Jerusalem at gackerman@bloomberg.net.

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

 

Zion Oil Opens $31+ Million Rights Offering

On Thursday, June 23 Zion Oil & Gas, Inc. (NASDAQ: ZN) filed a prospectus with the SEC for a $31.25 million rights offering to current stockholders. The rights offering consists of 6,250,000 non-transferable subscription rights @ $5 per Unit. Each subscription right Unit includes (1) share of Zion common stock and (2) warrants to buy additional shares of common stock @ $3.50 per share. Zion stockholders will receive (1) subscription right Unit for every (4) shares of Zion common stock they own as of June 15.

What this offering means is that if a Zion stockholder owned 1,000 shares, for example, of common stock on June 15, Zion will send, at no charge, 250 ‘subscription rights Units’. Each Unit, if exercised @ $5, entitles the stockholder to (1) share of Zion  common stock and (2) warrants to buy additional shares @ $3.50 within one year of the offering’s close. Exercising the Unit offering including the Warrants would cost the stockholder a total of $12 per (3) shares of Zion common stock. As of this writing Zion common stock is trading on NASDAQ (ZN) @ $5.56 – buying (3) shares of Zion common stock at the current trading price would cost $16.68.

This offering is currently scheduled to close on July 25, 2011. Even though the offering limits stockholders to (1) subscription right per (4) shares of common stock owned, stockholder may oversubscribe to purchase additional that remain unsubscribed at the close of the offering, subject to availability and allocation.

If fully subscribed, Zion will raise $31,250,000 from the sale of Units, and if the warrants are fully exercised within a year of the offering’s close, an additional $43,750,000. According to the Prospectus Zion Oil & Gas will use proceeds from the offering “for (i) furthering our oil and gas exploration program by carrying out geological and geophysical studies on our exploration areas, (ii) complete logging, interpretation and any production testing that may be deemed needed with respect to the Ma’anit-Joseph #3 well (iii) drilling a well on our Jordan Valley License and (iv) general corporate purposes.

Zion’s Prospectus describes the company’s current and applied for exploration territory in Israel:

“We currently hold two petroleum exploration licenses, which we have named the Joseph License and the Jordan Valley License, covering approximately 139,000 acres of land onshore Northern Israel.  A third petroleum exploration license, the Asher-Menashe License covering approximately 79,000 acres of land adjacent to the Joseph License, expired on June 9, 2011, its scheduled expiry date. We have continuously held the Asher-Menashe since June 2007 and we have drilled one exploratory well in this license area. Prior to the expiry of the Asher-Menashe License, we submitted to Israeli Petroleum Commissioner an application to extend the license. We do not believe that the Israeli Petroleum Commissioner will deny our application for the extension while we have a current well on the site; however, no assurance can be provided that the requested extension will be granted.

“In February 2011, we submitted to the Commissioner applications for two exploration licenses and an application for a preliminary exploration permit. One of the license applications and the application for the preliminary exploration permit cover substantially all of the area covered by our previous Issachar-Zebulun Permit, which expired on February 23, 2011. We named one license application (with respect to part of the previous Issachar-Zebulun Permit) the Jordan Valley License Application and the preliminary exploration permit (applied for with respect to substantially the balance of such area) the Zebulun Permit Application. We named the other license application the Dead Sea License Application as it relates to areas within the vicinity of the Dead Sea.”

Zion Oil Rights Offering

DALLAS and CAESAREA, Israel, June 6, 2011 (GLOBE NEWSWIRE) — Zion Oil & Gas, Inc. (Nasdaq:ZN) announced today that it intends to launch a rights offering. Under the rights offering, Zion will distribute non-transferable subscription rights to holders of Zion’s common stock on the record date of June 15, 2011, to purchase their pro-rata portion of approximately 6.25 million Units of Zion’s securities. Each Unit will consist of one (1) share of Zion’s common stock and warrants to purchase two (2) additional shares of Zion’s common stock at an exercise price of $3.50 per share.

Under the rights offering, stockholders of record on the record date will therefore have the right to subscribe for one (1) Unit for every four (4) shares of common stock owned on the record date, equivalent to 0.25 subscription rights for each share of common stock owned on the record date.

Each whole subscription right will entitle the stockholders of record on the record date to subscribe for one Unit at the per Unit purchase price of $5.00. The warrant will be exercisable for a one-year period beginning on the closing date after the rights offering expires.

The rights offering is planned to commence as soon as practicable after the record date and to continue through 5:00 p.m. Eastern Standard time on July 25, 2011, subject to Zion’s right to extend the offering in its sole discretion. The rights offering will also include an over-subscription privilege, entitling a stockholder who exercises all of their basic subscription privilege the right to purchase additional Units that remain unsubscribed at the expiration of the rights offering, subject to the availability and pro-rata allocation of securities among stockholders exercising their over-subscription right.

If the rights offering is fully subscribed, then the gross proceeds of the offering will be approximately $31.25 million, before offering related expenses which the Company estimates should not exceed $150,000. This figure does not include proceeds, if any, from any future exercises of the warrants. The proceeds of the rights offering will be used to further Zion’s oil and gas exploration program in Israel.

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. (read full Press Release)

Editor’s note: Zion stock rose to a high of $7.87 today before closing at $6.28.

There is Oil in Israel …

Everybody know the joke; “Moses should have turned left instead of right, he picked the only place in the Middle East with no oil”.
Zion Oil & Gas CEO Richard Rinberg proves naysayers wrong in this video – showing viewers the oil Zion has already discovered in Israel. This video was shot at Zion’s office in Caesarea, Israel.

Israeli Oil Could Have a Bigger Impact Than Gas

The Jerusalem Post reported this week on an assessment from the Swiss based financial services giant UBS, that a significant oil find could have a greater impact to Israel’s economy than the recent massive natural gas discoveries offshore.

UBS analysts, Roni Biron, Ziv Tal and Reinhard Cluse wrote in a report on the Israeli gas and oil sector that: “Our calculations suggest that, in the event of success, oil could potentially deliver a boost to GDP growth, the budget and the external balance that might potentially be even bigger than the impact from natural gas.

“This would also imply a larger appreciation potential for the shekel and an even greater requirement to manage the resulting macroeconomic challenges through a carefully managed sovereign-wealth fund.”

Simply put, UBS analysts are saying that discovering oil could mean more to Israel’s economy, trade balance, domestic budget, value of the shekel and long term national wealth than the recent gargantuan offshore natural gas finds that will make Israel both import independent and a major exporter. Not to mention (they didn’t) that being oil and gas independent would add significantly to Israel’s national security.

The UBS analysts reminded readers that the Leviathan and Tamar fields were the world’s largest gas discoveries in the past decade, that Tamar would be sufficient for all of Israel’s domestic needs, making Leviathan available for 100% export. They reported, “natural- gas exports from the Leviathan field will begin in 2017 at almost $3 billion per year, before rising to almost $6 billion in 2020.”

$6 billion per year from natural gas exports – that’s significant! What’s more significant is that the UBS report was about how a oil could have a greater impact.

Zion Oil Stock Continues Upward Trend

Zion Oil & Gas Stock (ZN, NASDAQ) continues to rise since it’s six month low of $4.31 back in January. On March 2nd of this year Zion stock shot to $5.81 after broadcast media interviews and print news articles with Founder John Brown and CEO Richard Rinberg during the National Religious Broadcasters convention in Nashville.

Zion stock settled down under $5.00 during much of March and then began to climb in April, topping at $5.40 after April 14 news of Israel awarding Zion Oil & Gas the Jordan Valley exploration license. Zion stock on the last day of trading since this report finished at $5.37.

Trading analyst, SmarTrend, announced Thursday that their  ’uptrend’ call has been “vindicated” by Zion’s recent stock performance.

So what does this mean to those of us who aren’t Wall Street day traders or stock analysts? I’m not sure – I’m not one of those guys. I own Zion Oil stock because I believe in what they’re doing and I believe in the nation of Israel. Zion’s vision is to find oil in Israel and provide for the nation’s domestic energy needs through that(those) discovery(ies).

What about the daily ups and downs of Zion’s stock? At this point, who cares? I figure that an oil company’s stock value isn’t really all that important until they’ve either discovered oil and/or gas, or they give up looking. Zion hasn’t made a discovery (yet) and they sure as heck haven’t shown any signs of giving up. Until one or the other happens, I’m all in.

*Reminder – the editor of www.OilinIsrael.net is not an investment consultant or a stockbroker (not even close). For investment advice see your financial counselor, or better yet – if you’re a believer in Israel’s G-d, seek His advice.

Zion Oil Appoints Ilan Sheena as CFO

Zion Oil & Gas, Inc. (NASDAQ GM: ZN) announced on April 7 that Mr. Ilan Sheena CPA (Israel) has been appointed Chief Financial Officer of the Company, effective March 31, 2011. Mr. Sheena replaces Kent Siegel, who has resigned from the Company by mutual and amicable agreement.

Mr. Sheena, age 52, has been Vice President (Finance) of the Company’s Israeli Branch since November 2009 and Managing Director of the Israeli Branch since August 2010. Mr. Sheena is an accounting professional with broad local and international experience. He has a degree in Accounting and Economics from Tel Aviv University and is a member of the Institute of Certified Public Accountants in Israel.

*Editors Note: I have visited Zion’s Israel offices several times in the last few years and met Ilan when he first came aboard with Zion and have spoken with him on every subsequent visit. In my opinion, Zion is fortunate to have such a capable and positive person in the CFO position.

Steve Spillman

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