Zion Oil & Gas, Inc. released an updated map of it’s current and applied for exploration area. Updates include splitting Zion’s former ‘Issachar-Zebulun’ permit area into two new (applied for) areas – the ‘Zebulun Permit’ and the ‘Jordan Valley’ license. Surprisingly, Zion has also applied for an exploration license near the Dead Sea in the same area where Ginko/Lapidoth discovered oil in 2006.
According to Israel’s Petroleum Law, an exploration permit cannot exceed 18 months and allows the permit holder to conduct preliminary investigations, but not drill in the permit area. An exploration license is granted for three years and can be extended another four years. Licensees are required to drill test wells in the license area. An exploration license may not exceed 400,000 dunams (approximately 100,000 acres) in area.
December has been a busy month for Zion Oil & Gas, Inc. (Dallas, Texas and Caesarea, Israel) as they prepare for drilling activities scheduled for early 2009.
The company issued three press releases over the last thirty days that, if we look a little deeper, may give us a forecast on what to expect in 2009.
The first press release, issued on November 14, reported the company’s third quarter financial results. Quarterly reports from public companies are required by SEC regulations. Zion Oil reported a net loss of $865,000 for the quarter (that’s eight cents per share). A loss like that sounds pretty glum unless we remember that Zion, at this point, is an exploration company. They explore for oil. That means they don’t produce income until they find oil. Now about finding oil – here’s something interesting you may miss if you don’t read the press release closely:
“Zion is moving forward with its exploration and drilling plans. We anticipate that the refurbished 2,000 horsepower drilling rig, with which we plan to drill Zion’s planned Ma’anit-Rehoboth #2 well ‘directionally’ to below 18,000 feet, will be shipped into Israel during January 2009. We have almost finished preparing the drill site and expect to commence drilling shortly after the rig arrives on location.”
Zion expects the delivery of a “2,000 horsepower drilling rig” in January. The new rig has a drilling depth capacity of 20,000 feet. Why is that important? In 2005 Zion Oil drilled the Ma’anit #1 well to a depth of 15,500 feet. The deeper they drilled the stronger the oil shows became. So why stop at 15,500 feet? That was all the rig they were drilling with could stand. They wanted to go to 18,000 feet but they would have lost the well due to rig failure if they had kept going. The rig Zion used in 2005 was a 1,000 horsepower rig with at total depth drilling capacity of 15,000 feet. It was the biggest rig in Israel.
So now you can understand why the rig Zion has coming from Turkey in January is such an important part of a commercially viable oil discovery in Northern Israel. Zion discovered oil at the Ma’anit #1 in 2005. They didn’t have the equipment finish the job. Come January they will.
The next press release, issued December 2, announced Zion issuing units and the second closing of their current public offering. Zion issued 350,994 units. A unit is one share of Zion stock and one warrant, giving the purchaser the option to buy one more share at a fixed price ($7.00) any time between the closing of the offering and January 31, 2012. Zion’s stock, as I write this post is at $6.20; it’s been bouncing between $6.10 and $6.50 over the last thirty days. That stock was issued at $7.00 in January of 2007 when the company went public. The fact that the stock has pretty much held its value for two years without any oil production or revenue, and in light of the current global economic meltdown is more than impressive. Makes me wish General Motors and Bank of America stock were as stable. By the way, this public offering has its final closing on January 9. After that, the public will not be able to buy more units (one share of stock & one warrant).
Let’s put two and two together. Zion is taking delivery on the rig that will reach the depth they couldn’t get to when they drilled in 2005. Zion’s public offering is closing January 9. Those who bought or buy (we still have a few weeks left) during the current offering get one share of stock and the right to buy another share at $7.00 any time before January 31, 2012. If Zion’s stock has held its value in the last two years in spite of it not producing any oil revenue and a world economic collapse, imagine where it could go with an oil discovery. I’ll leave the rest of the math to you.
Finally, the last press release issued December 16; Zion announced the purchase of over $1 million in drilling pipe, crating up the drilling rig for transport to Israel and final preparations at the drill site. This isn’t just a post on the internet, folks. It’s the real deal. Zion Oil will be drilling at the first of the year. And who will be a part of whatever happens to Zion in 2009 will be determined when the public offering closes in January.
Does Israel really have oil? That seems to be the question everyone’s asking. Maybe it’s the wrong question. Turn’s out, Exxon and Shell have known about Israel’s oil for nearly ten years. Here’s a clipping from The Jerusalem Post, March 5, 1999. I’ll copy the text here since the clipping is a little hard to read (click on the clipping for a cleaner version).
As a geologist and managing director of various oil exploration companies in Israel over the past 20 years, I was quoted in several paragraphs of Michael Arnold’s article “Slippery dreams” (January 22). I would like to amend and add certain facts as follows:
The oil potential of Israel was evaluated twice at the request of the Israeli government. In 1962, Lewis Weeks, the former chief geologist at Exxon, determined that “the potential ultimate oil resources of Israel should be of the order of 500 to 2,000 million barrels from primary recovery… The figures do not include gas… which may equal 50% and upwards of that of the oil.”
In 1979, James Wilson, former chief geologist or Shell (US) determined that on-shore Israel (the off-shore and the Dead Sea Rift Valley were not included) has a potential of330 to 2,000 million barrels of recoverable oil.
Both these experts have been president of the American Association of Petroleum Geologists.
Since the Wilson evaluation in 1979, extensive data have been accumulated relating to on-shore and off-shore Israel. From this data, it becomes clear that the total may exceed 2,000 million barrels.
Israel’s per annum consumption amounts to about 70 million barrels.
The 1962 evaluation predicted that “the finding and recovery of this oil and gas may require many decades” -and evidently assumed that such efforts would be made. Unfortunately, this has not been the case.
It is most likely that this failing is one of the main reasons why the forecast potential has not yet been discovered.
2,000 million barrels? That’s 2 billion barrels. That’s Exxon and Shell saying it. So the question isn’t “does Israel have any oil?” The question is, “If the big boys have known about this for so long, why haven’t they done anything about it?” The answer, unfortunately, is pretty easy. They’ve got larger, established assets in the Arab world and the Arab world has told them, “If you do business with Israel, don’t bother doing business here.” That’s what the 1973 oil embargo was all about.
What’s Israel’s answer? Keep supporting those who are exploring for the oil they know is there. What can we do about it? Stop wondering if Israel really has any oil. It does. If you want to see it come to the surface, support the exploration already in country. This piece of history will come about, and it won’t be long until it does. Those involved in that effort are destined to be written in to the story of Israel’s future.
Seems like we can’t get enough Dead Sea oil discovery news lately. Just today The Jordan Times ran an article apparently confirming the existence of a Dead Sea oil discovery on their side of the salt lake.
According to The Jordan Times:
After years of disappointment, many came to accept that the Kingdom is home to little or no oil reserves.
But with recent claims of the possibility of Jordanian oil, and a parliamentary committee examining the issue, the subject has been elevated to a national discourse steeped in controversy and unanswered questions.
The issue dates back to 1996, when the Natural Resources Authority (NRA) signed a Production Sharing Agreement (PSA) with US company Trans-Global to explore for oil in the Dead Sea area….
Over the next few years, the firm dug four wells at Isaal and Wadi Mujib, some thousands of metres deep, in hope that the rift valley would yield any positive results.
According to the company, logging data and technical studies of the wells revealed huge oil traps of hydrocarbons with significant commercial potential and large oil pays, the solid technical indicators of a major oil discovery.
On August 15, 2005, as per the PSA, the company said it officially informed the NRA of its discovery, but the authority declined to review the studies, according to Trans-Global, which felt there was little interest on the part of the NRA administration to follow through.
“This is the exact opposite of how any petroleum ministry in the world would respond to the discovery of oil,” Trans-Global General Manager Nazeeh Abraham told The Jordan Times.
“We claimed a significant oil discovery, and instead of developing it they denied it. We then faced obstructions every step on the way, preventing us from starting a large accelerated drilling development programme,” he added.
Frustrated with the lack of interest from the authority, Trans-Global announced the discovery during the 9th International Geological Conference of the Jordanian Geologists Association in Amman in April last year.
The announcement created an uproar and came as a shock to the NRA.
“They went public without ever informing us, which is a breach of the PSA. We were only told of a technical discovery, which doesn’t mean much in the oil business,” NRA Director Maher Hijazin told The Jordan Times.
“We have all the documents to prove that there is no discovery,” he stressed.
Although the announcement was shocking to many, it came as no surprise to Jordanian Geologists Association (JGA) President Khaled Shawabkeh.
He claimed that the NRA drilled at least five wells in the area in the 1990s, and found oil in different quantities, although their commercial viability was not verified.
Lack of support and technical difficulties brought on by the area’s topography prevented the authority from any further exploration, and the subject was shelved, he said.
“In my view, Trans-Global has made an oil discovery. The quantity and commercial quality of this discovery should now be explored,” the JGA president stressed.
Weatherford, Reeves Logging Ltd., one of 14 third-party companies that performed assessment studies for Trans-Global on the Isaal and Wadi Mujib wells, said it could not confirm or deny the existence of oil in the area, as their only purpose was to log data, not analyse it.
Another industry source, however, told The Jordan Times that the independent third-party studies pointed to “a strong possibility” of commercially viable oil in the Dead Sea area.