Zion Oil & Gas Newsletter March 5

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Zion Oil & Gas Newsletter March 5, 2010 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Dear Shareholder and/or Friend of Zion… Last week, both Bill Ottaviani (Zion’s President and Chief Operating Officer) and I visited New York, in order to present Zion Oil & Gas at the ‘NASDAQ-Oppenheimer 14th Annual Israeli Equities Conference’. We presented to investment professionals attending the ‘by invitation only’ event. Amongst others, conference attendees included representatives from Bank of America, Credit Suisse and Morgan Stanley. We believe that the presentation, an audio webcast with slides, was successful and have posted a link to it on Zion’s homepage (www.zionoil.com) so that you can review and enjoy it. Please note that, due to the ever increasing demands on management time, from now on, we will send you an update email once every two weeks, instead of every week. Of course, if there is anything urgent to report, we will issue a press release or a ‘breaking news’ email to you. But, as always, our petroleum exploration work will continue at an unabated pace… every single working day. ……………………………………………………… So, here is this week’s operations update: The Ma’anit-Rehoboth #2 Wellsite The Ma’anit-Rehoboth #2 Well Since the previous report, I am pleased to note that we have restarted rig operations on this well, as you can see in the pictures above (photographed on Thursday, March 4, 2010). Apart from the rig crew of Aladdin Middle East, the Metsada wireline truck is onsite as is the Weatherford team and their equipment. Our plan is to test several geologic intervals for the presence of producible hydrocarbons. These various ‘intervals of interest’ were previously identified through the use of open-hole diagnostic tools when the well was drilled. Now that we have the drilling rig back on the hole, we can “complete” the well. In the past days, we completed some of the initial down-hole preparatory work that was needed before we can production test the first geologic interval. This preparatory work included milling out the plug used to isolate the open-hole section of the well and validating that the cement bond quality between the casing and rock formation is adequate for testing. Without a good cement bond, that effectively isolates the zone we wish to test, we risk not being able to accurately evaluate the productivity of that particular zone. To assess if the cement bond is adequate, we used an electronic down-hole tool (aptly named a ‘Cement Bond Logging Tool’) that confirmed that we do have sufficient bond quality. This is good news as it means that we do not need to perform a remedial cementing operation and can proceed to the next phase of the testing operation for this first interval. The next phase includes perforating the zone of interest and testing the well for hydrocarbon flow. To ‘perforate’, we use shaped explosive charges that are run into the well on a perforating ‘gun’ – a long hollow cylinder.  The charges are spaced out equally along this cylinder, across the zone of interest, and detonated from the surface. The energy from the exploding charges penetrates (or perforates) the casing and into the rock formation. This action creates a passageway for any hydrocarbons in the rock to find their way to the wellbore.  The pressure drop from the higher pressure rock to the lower pressure wellbore allows any hydrocarbons present to flow from the rock to the well. We plan to use sophisticated equipment from Schlumberger Oilfield Services to measure pressures and flow rates, both inside and outside the well, all critical data needed to assess a well’s long term production capabilities. Logistical planning and coordination continues to be a significant challenge in Israel, as we have to import much of the equipment needed for our well operations. For the most part, we have been securing our needed resources for this well work on a ‘just in time’ basis. Now that we do not have to perform a remedial cementing operation, we find ourselves in a situation where we may need to wait on some needed equipment to continue our work without interruption. Our suppliers have been working very hard to ensure they meet our tight timing needs, but sometimes delays are inevitable.  Should we encounter such a delay, we don’t anticipate it to be very long and will be doing everything possible to stay on our planned schedule to complete the full testing program in April 2010. Operations at the Elijah #3 Well (No change from previous report.) The Elijah #3 well was drilled to a depth of approximately 10,938 feet (3,334 meters) when the drill string became stuck within the Asher Volcanics section of the hole. After recovering a significant portion of the stuck drill pipe, progress in recovering the remainder of the pipe slowed and the decision was made to temporarily suspend drilling operations pending further analysis of the situation and to relocate the rig to the Ma’anit-Rehoboth #2 well. We are currently assessing various options that should enable us to proceed with the ‘next steps’ for this well. The Issachar-Zebulun Permit Area The Issachar-Zebulun Permit Area As reported previously, Zion and the Geophysical Institute of Israel (GII) have signed an Agreement for GII, on behalf of Zion, to acquire approximately 30 kilometers of seismic data in Zion’s Issachar-Zebulun Permit area. A pre-site assessment field trip was conducted last month by Zion’s geological team and members of GII.  As you can see from the photo, doing field work can, at times, be a fairly messy business.  The purpose of the site visit was to assess the general area where seismic data is to be collected and identify potential natural barriers (e.g. waterways) or other impediments (man-made structures) that could impact the seismic acquisition process. With the pre-site assessment completed, detailed planning can now commence for the actual field work. The timing for the field work has been pushed back by a number of weeks, as the seismic crew for GII are currently out of Israel and not scheduled to return until mid-summer 2010. “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 sufficiency of cash reserves 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.com ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Zion Oil to Present at the NASDAQ-Oppenheimer Israeli Equities Conference in New York

Zion Oil & Gas, Inc. (Nasdaq:ZN) will be participating at the NASDAQ OMX and Oppenheimer 14^th Annual Israeli Equities Conference in New York on February 23, 2010.

Richard Rinberg, Zion’s Chief Executive Officer, and Bill Ottaviani, Zion’s President and Chief Operating Officer, are scheduled to present at the conference at 3:05 p.m. EST on February 23, 2010. A copy of the presentation will be made available on Zion’s website after that date.

Zion’s common stock trades on the NASDAQ Global Market under the symbol “ZN” and Zion’s warrants trade under the symbol “ZNWAW”.

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 the 14th Annual Israeli Equities Conference

NASDAQ OMX and Oppenheimer & Co. are pleased to present the upcoming 14th Annual Israeli Equities Conference to be held February 23-24, 2010 at Oppenheimer’s offices at 300 Madison Avenue in New York City.

This conference will bring together over 20 of Israel’s leading companies representing a variety of industries and a range of market capitalization. The format will consist of investor presentations and 1-on-1 and small group meetings. This setting offers both investors and company management intimate discussion on the business environment in Israel and globally.

About Oppenheimer

Oppenheimer & Co. Inc. (“Oppenheimer”) is a leading investment bank and full-service investment firm that provides financial services and advice to high net worth investors, individuals, businesses and institutions. For over 125 years, Oppenheimer has provided investors with the necessary expertise and insight to meet the challenge of achieving their financial goals.

Oppenheimer is a wholly owned subsidiary of Oppenheimer Holdings Inc., an integrated financial services holdings company. Oppenheimer Holdings Inc.’s other wholly owned subsidiaries include Oppenheimer Asset Management Inc., Oppenheimer Life Agencies Ltd., and Oppenheimer Trust Company.

Zion Announces New President/COO

Bill Ottaviani Joins Zion Oil as President and Chief Operating Officer

DALLAS and CAESAREA, Israel, Feb. 1, 2010 (GLOBE NEWSWIRE) — Zion Oil & Gas, Inc. (Nasdaq:ZN) announced today that William L. Ottaviani has joined the Company as President and Chief Operating Officer.

William (Bill) Ottaviani, a Petroleum Engineer, has spent 25 years (1982 to 2007) working for Chevron Corporation in various countries, including Angola, Indonesia and the USA, and two years (2007-2009) as Chief Operating Officer of Rex Energy. He earned a Masters in Business Administration from California State University and a Bachelor of Science degree (with High Distinction) in Petroleum and Natural Gas Engineering from Pennsylvania State University.

During his career, Mr. Ottaviani was awarded multiple Chevron and U.S. Department of Energy Recognition Awards for performance achievements. When working for Chevron’s subsidiary, Caltex Pacific Indonesia, Bill was awarded the company’s highest recognition, earning the President’s Award for his work in successfully negotiating a $1.5 Billion gas contract. He is a member of the Society of Petroleum Engineers.

Zion’s Chief Executive Officer, Richard Rinberg, said today that, “Bill Ottaviani joins Zion with a proven industry track record and will greatly strengthen our managerial and operational competence. Bill is a first class oil and gas professional who has the experience, the ability and the specific skill-set to provide Zion with fundamental operational and technical direction, help us to implement our multi-well strategy and achieve success with our operations.”

Zion’s common stock trades on the NASDAQ Global Market under the symbol “ZN” and Zion’s warrants trade under the symbol “ZNWAW”.

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.

Zion Moving Rig Back to Ma’anit Rehoboth #2

DALLAS and CAESAREA, Israel, Feb 5, 2010 (GlobeNewswire) –Zion Oil & Gas, Inc. (Nasdaq:ZN) announced today that the Company is mobilizing its drilling rig, currently situated at the Elijah #3 well, to resume production testing operations on the Ma’anit-Rehoboth #2 well as soon as possible within approximately two weeks.

Zion drilled the Ma’anit-Rehoboth #2 well 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 a small quantity of crude oil has been recovered and analyzed.

Zion completed drilling the Ma’anit-Rehoboth #2 well in September 2009 and decided, based on the best information then available, to move its drilling rig to begin drilling its Elijah #3 well. Zion’s intention was to attempt to test and complete the Ma’anit-Rehoboth #2 well with a small workover rig. In December 2009, as planned, the Company brought in a small workover rig to conduct swabbing operations on the Ma’anit-Rehoboth #2 well.

Due in part to personnel transitions and a shortage of adequate equipment in Israel to conduct satisfactory completion operations on the Ma’anit-Rehoboth #2 well, the Company was not planning to resume testing operations on the Ma’anit-Rehoboth #2 well until sometime in March or April of 2010.

However, given previously reported operational challenges on the Elijah #3 well, Bill Ottaviani, Zion’s newly appointed President and Chief Operating Officer, decided that a temporary suspension of operations at the Elijah #3 was a prudent course of action in order to expedite production testing at the Ma’anit-Rehoboth #2 well.

Mr. Ottaviani commented, “Following the drilling of our Ma’anit-Rehoboth #2 well, we have continued to observe evidence of reservoir pressure and the presence of hydrocarbons at the surface. Our geologists have identified several potential hydrocarbon-bearing intervals from the diagnostic data acquired when the Ma’anit-Rehoboth #2 well was drilled. We are currently fine-tuning our plans for production testing these intervals and are looking forward to resuming operations at the Ma’anit-Rehoboth #2 well. As we have stated in the past, we are unsure as to whether we have made a discovery of any hydrocarbon reservoir or, if such a reservoir exists, whether it would be commercially viable.”

Zion’s Chief Executive Officer, Richard Rinberg, said today that, “We have every expectation to resume activity on the Elijah #3 well in the not-too-distant future, once we conclude on the best course of action for this well. Based on our current geologic assessment, we remain excited about the hydrocarbon potential in this license area and look forward to ‘making hole’ once again at this location. While we temporarily step back from one well to reconfigure our next steps, we are quickly ramping-up activity at another, as we continue to implement our multi-well strategy.”

Zion’s common stock trades on the NASDAQ Global Market under the symbol “ZN” and Zion’s warrants trade under the symbol “ZNWAW”.

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.

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

Oil Discovery at the Ma’anit-Rehoboth #2?

Earlier this month Zion Oil & Gas, Inc. brought the company’s first oil discovery to the surface at the Ma’anit-Rehoboth #2 well. At this point Zion isn’t saying exactly what this discovery means because, frankly, they don’t know; more testing needs to be done to determine whether or not the well is commercially viable (enough oil to make a commercially productive well).

One thing Zion Oil, and now the world, does know – there’s oil at the bottom of the Ma’anit-Rehoboth #2 well; even if it’s just the bottle Zion Oil Drilling Manager John McKenny is holding in the photo released soon after the ‘discovery.’ Zion, however, would have to be awfully lucky to drill nearly three and a half miles into the earth and hit the only quart of oil in Northern Israel. Chances are there’s more down there than the sample in the photos. How much more is yet to be determined.

In his recent company newsletter Zion Oil & Gas CEO Richard Rinberg announced that, ‘we retrieved a small quantity of crude oil‘ during swabbing operations at the Ma’anit-Rehoboth #2. Rinberg stated that they believe the oil samples came from the ‘uncased’ portion of the well, below 4,825 meters (15,830 ft.). According to the December 18 newsletter, “… as we do not have zonal isolation in the open hole section of the well, we released the workover rig during the past week and are now evaluating the next steps that we can or should take in order to test the zones of interest individually.”

What can we take away from what’s been stated in company newsletters in the last few months?

1. The Ma’anit-Rehoboth #2 contains three zones below 15,830 feet that “warrant completion testing” (Zion newsletter 11/08/2009).

2. The Ma’anit #1 was only drilled to a depth of 15,500 feet, making the three zones below 15,830 feet at a depth previously not explored by Zion during the Ma’anit #1 operation.

2. The oil samples announced on December 11 came from the area of those three deep zones, but since the well is only cased to 15,830 feet Zion doesn’t know which zone(s) of interest the samples originated from (Zion newsletter December 18).

3. Zion has released the workover (testing) rig at the Ma’anit-Rehoboth #2 site (Zion newsletter December 18).

4. Zion is “now evaluating the next steps that we can or should take in order to test the zones of interest individually.” (Zion newsletter December 18)

5. According to Rinberg: “It is currently anticipated that we will not resume testing procedures on the Ma’anit-Rehoboth #2 well until after March 2010.” (Zion newsletter December 18)

6. Out of an available 327,000 acres of exploration area, Zion’s next planned drilling location is within the Ma’anit structure, just a kilometer from the Ma’anit-Rehoboth #2. (Zion newsletter 12/11/2009)

Translation?

Zion “retrieved a small quantity of crude oil” during swabbing operations below 15,830 feet in an uncased section of the well that contains three zones that “warrant completion testing.” Because the hole is ‘open’ (uncased) they can’t isolate which zone(s) the oil they’ve brought to the surface originated. They’re “now evaluating the next steps that we can or should take in order to test the zones of interest individually.” But they’ve released the testing rig and don’t plan to resume testing until after March of next year. The next well is planned for the same structure on which the Ma’anit-Rehoboth #2 sits.

(We’re crossing over into a little speculation on my part here … not much, but a little. My analysis comes only from the information Zion has given given us in their public documents, as I’ve listed above).

Whatever Zion has ‘discovered’ at the bottom of the Ma’anit-Rehoboth #2, it isn’t (in their minds) a ‘gusher’, at least not yet. If Zion had what they believed conclusively to be a ‘major discovery’, they would have announced it to the world the day it happened. They’re more eager for a ‘major discovery’ than any of us, when it happens they’ll be the first to tell us. Whatever Zion has ‘discovered’ at the bottom of the Ma’anit-Rehoboth #2 is positive enough to warrant plans to isolate the three open hole zones below 15,830 feet.

The company has released the completion rig that was set up at the Ma’anit-Rehoboth #2 site and they don’t plan to resume testing until after March 2010. Three possible explanations come to mind; either the current rig is incapable of the next planned phase of completion testing (casing the ‘open hole’ beyond the deepest ‘zone of interest’, for example), or it had an appointment elsewhere, or “evaluating the next steps” is going to take more than three months.  I don’t know the answer, but only one of those explanations seem plausible to me.

That’s enough speculation for one week; lets get back to two things we know. Last month Zion hadn’t discovered even a drop of oil; this month we know they’ve produced at least a quart. That’s something. The second thing we know is something Richard Rinberg reminded us of in his October 30 newsletter, “The end of the matter is better than its beginning, and patience is better than pride” (Ecc. 7:8)

Yossi Langotsky, Israel’s Unlucky Oil Man

On November 30 the Wall Street Journal printed the story of Yossi Langotsky, an Israeli who has been searching for oil in the Promised Land for fifty years. The WSJ story focuses on Yossi’s involvement in Israel’s recent off-shore gas discovery and how he was left behind in its reward.

I met Yossi almost five years ago and learned about his role in the search for Israel’s oil. It was early April, 2005; Elaine and I had been invited to the Zion Oil & Gas  ‘Ma’anit #1′ spudding (beginning drilling operations) ceremony; the company’s first oil well drilling project in Northern Israel. Before the ceremony we were introduced to Mr. Langotsky, and then aside, we learned the unfortunate story of Yossi’s relationship to the Ma’anit #1.  The hole in which Zion Oil was to begin drilling in the spring of 2005 was, at that time, already 7,661 feet deep. This spudding ceremony wasn’t the first for the Ma’anit #1; in 1995 and Yossi headed the first drilling of the Ma’anit #1, but at 7,661 feet the project had run out of money and the hole was abandoned. Zion Oil & Gas reopened the Ma’anit #1 in 2005, drilled to 15,500 feet and then abandoned the well due to mechanical problems. Earlier this year, Zion re-opened the Ma’anit #1, now dubbed the ‘Ma’anit-Rehoboth #2′ and drilled directionally to a total depth of 17,913 feet.

Today seven zones of the Ma’anit-Rehoboth #2 are being tested for hydrocarbon (oil and gas) potential.  According to Zion CEO Richard Rinberg, in his October 30 newsletter, “With regard to our log analysis, an independent log analyst noted that the Ma’anit-Rehoboth #2 well does have a specified amount of potential ‘net pay’.” Although he was quick to warn readers, “You will appreciate that, until such time as we recover hydrocarbons at the surface (or not), we are not able to give any estimates of what (if anything) we believe we may recover.”

At this point,  whether or not the Ma’anit-Rehoboth #2 becomes a productive well, no one knows. Whatever happens, Yossi Langotski, the man who chose the location and drilled the first 7,661 feet, once again, will have his share of the bragging rights but not the profits. Below is the WSJ story.

For One Man, Israel’s Big Gas Find Is Bittersweet Victory

Wall Street Journal

By CHARLES LEVINSON

HERZLIYA, Israel — Two natural-gas fields in Israel’s Mediterranean waters were found in January to contain enough resources to meet Israel’s energy needs for 20 years — a huge find after more than half a century of lackluster carbon exploration here.

But for Yossi Langotsky, who for 10 years has been the driving force behind the project, the gusher was a bittersweet victory. He has been drilling holes in the Promised Land for nearly four decades, in a mostly futile search for energy. A month before drilling started on what would become the largest find in Israeli history, his financial backer pulled out. That forced him to relinquish his stake — today valued at an estimated $350 million.

“After 60 years of no success in oil exploration here in Israel, a miracle took place, and I lost out 30 days before it happened,” says Mr. Langotsky, 75 years old.

The pivotal role played by Mr. Langotsky in the historic discovery is undisputed. The two fields are named for his daughter, Dalit, and granddaughter, Tamar.

The fields, which won’t start producing gas until 2014, are relatively modest by Mideast standards. But they have already triggered a frenzy in the country’s quiet energy industry.

Since January, Israeli oil companies’ stocks have soared, some rising as much as tenfold. In 2009, oil companies have invested between five and 10 times as much in Israel exploration as at any point in the country’s history, says Yaakov Mimron, head of Israel’s Petroleum Commission.

In recent weeks, two international companies, including Houston-based Noble Energy Inc., which led the team that made the gas find in January, separately began extensive and costly 3D seismic surveys of more offshore prospects. A Noble spokesman said they expect to drill new wells next year.

In the past 60 years, oil companies have drilled about 450 wells, but choked out just 20 million barrels of oil, less than Saudi Arabia churns out in three days.

Israel’s dearth of oil in a region awash in it became a national joke. “My closest friends laughed at me,” says Mr. Langotsky.

Many Israeli oil geologists quit the profession. Many of those who stayed are a touch unconventional by industry standards. The two exploration companies currently drilling for oil onshore in Israel are both run by pious prospectors, one an Orthodox Israeli Jew and the other a born-again evangelical Christian from Texas. They both use a combination of biblical prophecy and sound geological data to decide where to drill.

Mr. Langotsky began his oil career as a graduate student in the late 1950s, studying oil prospects along the Dead Sea. He left the profession when he was called on to serve in the army. He played a prominent role commanding an elite reconnaissance unit that helped capture Jerusalem from the Jordanians in the 1967 war.

After leaving the army in 1979, Mr. Langotsky returned to the oil business. For most of the next two decades he roamed Israel, drilling as many as 60 wells.

In the 1990s, Mr. Langotsky and a handful of others began looking offshore. Israel’s fortunes started to turn with a series of moderate-size gas finds in waters off the coast of southern Israel and Gaza.

It was then that Mr. Langotsky first turned his attention to a vast tract of territory deep underwater in the Mediterranean Sea, farther offshore than others were looking.

He pitched the prospect to about 100 top international oil firms, he says. They all turned him down, except for Britain’s BG Group PLC, which agreed to form a partnership with Israeli companies to study the site. The site was set to drill in 2002, but then the project snagged.

Drilling costs in such deep waters nearly 60 miles offshore would likely reach hundreds of millions of dollars, and the partner firms started squabbling about who would shoulder what percentage of the risk. There were also technical problems. Many international oil companies were wary of working in Israel, for fear of alienating oil-rich Arab governments.

Companies started dropping out, including, in 2005, BG itself. The company said the project wasn’t one of its drilling priorities at the time. Eleven different companies were in and out of the project at various times in the nine years it took to start drilling.

At last, in 2007, Noble, a midsize Texan oil company, agreed to buy a 35% stake and take over operations.

Since the project’s conception in 1999, Mr. Langotsky remained its public face. He convinced new firms and investors to join whenever one dropped out, and lobbied the Israeli government.

“If Yossi had not been there, then things would be looking quite different today,” says Charlie Druckman, Israel’s petroleum commissioner until 2004.

Early in the project, BG offered Mr. Langotsky the chance to buy a 5% stake. Unable to finance the stake himself, he brought in Israeli billionaire diamond and real-estate magnate Benny Steinmetz, who agreed in 1999 to buy the stake and give Mr. Langotsky one-fifth of his share, Mr. Langotsky said.

But in the summer of 2008, amid the global financial crisis, another infusion of cash was needed to start drilling, and Mr. Steinmetz balked, according to Mr. Langotsky. He said he would no longer invest in the project, relinquishing his 5% stake — including the share pledged to Mr. Langotsky, according to Mr. Langotsky. Other investors in the project took over the stake.

Mr. Langotsky still had the option to buy a 5% stake, but couldn’t find an investor to back him. Soon after, Noble announced the big find at Tamar, followed by the smaller Dalit field — finds amounting to nearly 1.2 billion barrels of oil equivalent. Mr. Langotsky was left with nothing but bragging rights.

Mr. Langotsky has captured some sympathy from industry colleagues and in the Israeli media. In the Israeli media’s portrayal of the situation, Mr. Steinmetz has been vilified. In September, Israel’s leading economic newspaper named him most in need of forgiveness for Yom Kippur, the Jewish day of atonement, for leaving Mr. Langotsky in the cold.

Supporters of Mr. Steinmetz say it didn’t make sense to continue with a risky, capital-intensive oil venture at a time of global economic uncertainty.

Mr. Langotsky remains defiantly upbeat. The son of early Zionist pioneers who valued duty to country over self, he insists his passionate search for oil was never about the money. “I’m very proud; I feel great,” he says. “I am totally disappointed that I failed to keep my rights, but this discovery is one of the greatest achievements of my life.”

Write to Charles Levinson at charles.levinson@wsj.com

Zion Oil Oversells Stock Offering by $19 Million

Special Report: Zion – The Movie

Special Report: Zion – The Movie

I traveled to Israel last week to work with Charter Films Limited, a UK film company. We (they) were doing preliminary shooting for a film about Zion Oil’s search for oil in Israel. Tom Boulting, Charter’s CEO met Richard Rinberg, Zion’s CEO on a flight to London a few months back and Richard shared the Zion Oil story with Tom. Tom was fascinated. As a filmmaker, Tom saw great possibilities for a documentary on Zion Oil; but after spending a few days with Richard and Zion Founder John Brown at Zion’s drilling sites in Israel he realized that a sixty minute documentary could only tell half the story. Tom started thinking ‘movie’.

As the ‘oil in Israel’ story teller up to this point, I was invited to spend last week with Tom and his cameraman, Jim, ‘on site’ while they filmed preliminary footage for both the documentary and a possible feature length film. I was able to share the ‘back-story’ with Tom and Jim, both on and off camera. They even christened me into the ‘film crew’ on location by letting me hold the boom mike during interviews and taught me some movie making lingo. It was a great experience personally, but more exciting was the realization that the world will soon witness the Zion Oil story through documentary on the small screen (TV) and (one day) on the big screen as a feature length movie.

There’s a lot of work to be done now by Charter Films, editing footage and preparing a short ‘promo’ piece to share with potential film partners. Speaking of ‘promo’ pieces, Charter Films is planning to join us at the 2010 National Religious Broadcasters’ Convention next February in Nashville to debut a sneak peek of “Zion – The Movie”.

Next week we’ll have http://zionthemovie.com online. By the time you’re about done with that left-over turkey, you’ll be able to visit the new website for great pictures, meet the director and stay up to date on the making of “Zion – The Movie”. Of course we’ll always give you the latest news here at http://oilinisrael.net.

Zion Oil Begins Drilling Elijah #3

According to Zion CEO Richard Rinberg’s ‘Zion Oil & Gas Newsletter’, Zion Oil began drilling the Elijah #3 well last week and by last Friday’s report, drilling depth on the Elijah #3 had reached 400 feet.

The Elijah #3 well site is located on northern Israel’s coastal plain near Mount Carmel, between Caesarea and Haifa, in Zion’s ‘Asher/Menashe” license area. Zion Oil’s Elijah #3 isn’t the first oil well to be drilled in this area and Zion Oil isn’t the first company to come to this region, known in the Bible as the ‘foot of Asher’, seeking the fulfillment of an ancient Bible prophecy. “And of Asher he said, Let Asher be blessed with children; let him be acceptable to his brethren, and let him dip his foot in oil.‘” (Deuteronomy 33:24)

Wesley Hancock

In 1961, Bible believing Californian, Wesley Hancock was awarded an exploration license area of 97,000 acres including Mount Carmel and extended into parts of the Jezreel Valley, known as the “Valley of Megiddo,” site of the prophesied last days battle of Armageddon. Armed with a report forecasting Israel’s oil potential, and his Asher passage in Deuteronomy 33, Wesley went looking for Asher’s oil. On September 19, 1963 Wesley spudded the Asher #1, north and east of Mount Carmel near Haifa. Asher #1 had reached a depth of 7,800 feet when the drill head twisted off, taking seven drill collars with it. After the twist-off, chances of drilling any deeper were nil. By January of 1964, testing in the hole above 7,800 feet revealed that the Asher #1 was dry. In 1965 Wesley commissioned a hydrocarbon survey of his license area. This was the first petroleum survey of its kind in Northern Israel. The survey results led to choosing his location for the Asher #2 well. Hancock drilled the Asher #2 to a depth of 4,300 feet and core samples showed traces of oil. The Asher #2, however, was shut down; Hancock, without any other investors, had run out of money and was unable to continue drilling.

Gilman Hill

In 1979 Gilman Hill, an American evangelical Christian, came to Israel looking for Asher’s oil. According to Hill, God directed him to drill for oil and showed him the well’s location during a 1978 tour of Mount Carmel. Gill had completed preliminary geological surveys and fulfilled permit requirements to begin drilling by 1980.
Hill’s well, Elijah #1, was planned to be drilled to the upper Triassic strata, a depth of 15,000 to 16,000 feet. At 8,900 feet Gilman halted the drilling. According to Hill, God gave him the message, “circumstances have changed,” Gil was convinced that he was to cease drilling until further notice from God. Gil continued his geologic research for another six years waiting for a Divine release to resume drilling. The release never came. After spending $6 million of his own money on Mount Carmel, drawn by the Bible’s promise that Asher would “dip his foot in oil,” Gilman Hill had failed to find the elusive flow.

Andy SoRelle

About the same time Hill started drilling Elijah #1, a Texas oil man named Andy SoRelle was busy preparing to drill the Atlit #1 well near Haifa, known as the Asher Project. SoRelle’s well was spudded in February 1981, the same year Jim Spillman’s book, The Great Treasure Hunt,  was released. Spillman and SoRelle were mutual supporters, each understandably interested in the work of the other. Throughout the Asher Project  SoRell updated Spillman on the progress of the well they both believed would strike the oil God had promised.
At 9,400 feet the drill bit hit volcanic rock.  They drilled down through another 7600 feet before finally coming into limestone again. The drill bit, now at 17,296 feet was way beyond the rig’s capacity. Fearing he would lose the hole, Atlit’s drilling supervisor shut down the operation until a larger rig could be brought in.
December 28, 1982 a new drill rig, rated at 26,000 feet was installed over the original hole. This new phase, dubbed the Atlit #II was planned to bring the well as deep as 23,000 feet. By February of 1983 the well had been cleaned out and depth had been increased to 18,000 feet.
Drilling continued without incident until, at 20,570 feet Atlit II struck oil! What oil experts call “very good shows” came to the surface; graded as light oil at 35 to 40 degrees API. SoRelle continued to a final depth of 21,431 feet. The zone of oil bearing rock, was estimated at 470 feet, from 20,570 to 21,309 feet. Two years after spudding, the drilling phase of the Atlit well was finally complete!
During development problems emerged again. Financing for the project had been on a shoe-string at best. The crew had stopped casing the well at 13,772 feet.  Not having funds for additional casing and reasoning that the volcanic rock they had struggled through was stable enough to hold the hole open the crew had continued drilling in “open hole.”

As the crew was cleaning the hole in preparation for the production casing, drill collars stuck at 18,669 ft and two weeks of jarring would not break them loose. Special equipment was flown to retrieve the string (130 ft. in length) and, while cleaning the hole to “fish” with the new equipment they stuck again at the 17,772 ft mark. After ten more days of trying to break loose, they came out leaving another 8 ½ foot fish in the hole.

August 24, 1983, more than two and a half years after spudding, Andy SoRelle called it quits for the Atlit hole.  Having spent more than $25 million, his own money and that of his investors, Andy gave up on the Atlit well.

The history of the search for Asher’s oil doesn’t seem very promising. But if God said of Asher, ‘… let him dip his foot in oil …’ then I’m convinced He’ll keep His promise in His own time. One thing I do know; the oil is down there. Hancock saw it and SoRelle saw it. That Asher’s oil exists is a fact, when it will be brought to the surface is the only question.

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