Lior Pick, Advocate and CPA

Significant attempts to locate oil have been made in the State of Israel over the years, since the days of the British Mandate, to no avail.

After Israel was established, the Oil Law was enacted in 1952 and several oil search companies and governmental institutions to support this activity were established, first and foremost the Geophysical Institution that performs magnometric and seismic surveys; and the Geological Institute that provides laboratory services.

Drills in Israel began in 1953, and oil was located for the first time in 1955 in the “Heletz” Field in the Northern Negev. In 1957, oil was located in the “Barur” and “Kohav” drillings in the same area. But despite of the great expectations, it turned out that Israel is no oil empire. Throughout its existence, the Heletz Field yielded about 17.2 million oil barrels, a negligent amount compared with Israel’s national consumption.

480 oil drillings have been performed in Israel in the sea and in the land and most of them did not yield commercial quantities of oil.

Several small gas fields were found between 1958 and 1961 in the south of the Yehuda Desert, but the small quantities of gas they yielded diminished over the years.

The picture changed dramatically in 1999 when large gas fields were first found in front of the State of Israel’s shores.

Discovering the Natural Gas Reserves (in Israeli Territory)

The area of Israel’s exclusive economic zone (EEZ) is estimated at about 25,111 square kilometers. This area is a part of the Levantine basin, a geological area that spreads over the entire eastern part of the Mediterranean Sea.

Natural gas was first found in the Levantine basin in the Nile River’s delta in Egypt, where vast natural gas searches and production activity takes place.

In June 1999, the “Thetis Sea” Partnership discovered the first large natural gas reserve in Israel in the “Noa” Field, and in February 2000 an additional reserve was located in the “Mary” Field, and they have estimated gas reserves at an amount of about 45 BCM (billion cubic meters).

Starting in 2004, commercial production of the gas from the “Mary” reserve began and until recently, it was used by the Electric Company to operate some of its power stations, which were converted from using mazut to using natural gas.

Following these discoveries, searches for oil and natural gas in front of Israel’s shores intensified. Investors from Israel and abroad entered the field of oil and natural gas searches, and they initiated the performance of marine seismic surveys using innovative technologies.

And so, the Noble Energy Company and its partners, Avner, Delek Drillings, Isramco and Dor Natural Gas Reserve discovered a large natural gas reserve in the “Tamar 1” drilling in January 2009, about 90 kilometers off Haifa’s shore. According to estimates, there are 238 BCM at the site.

In March 2009, the same partnership located a reserve which is estimated at about 7-14 BCM in the “Dalit 1” drilling, about 60 kilometers off the Gedera shore.

In June 2010, the Delek Drillings and Avner and Ratio partnerships announced that there is a good chance large amounts of natural gas are located in the “Leviathan” Reserve, to which the Delek Group, the Ratio Partnership and the Noble Energy Company have a common license.

In late 2010, after performing the Leviathan 1 drilling, it was declared that there are reserves in this field at an estimated amount of 535 BCM. However the tests were not completed yet.

In general, the marine gas fields were located in medium to deep depths: “Mary B” – 250 meters under the water, “Tamar” – 1,800 meters under the water and Dalit – 1,500 meters.

Thanks to these discoveries of gas, Israel became a country that can provide a significant portion of its energy consumption independently of external sources.

Now, with support and encouragement from the government and the Ministry of Energy and Water, large power station facilities and industrial plants are converted for gas use and the establishment of a national conducting and distribution system began, aiming to transport natural gas straight to every plant in Israel, and later to do the private sector as well.

Extensive searching activity still persists in Israel’s EEZ. In 2011, there were 5 possessions for production, 33 searching licenses and one early permit.

A large part of the search activity is intended to locate additional natural gas reserves. Works are based on the many seismic surveys that were performed in the 1970’s, mostly using the relatively obsolete 2-dimensional technology.

This is a general document and does not constitute counseling, and it may not be used as said in any case without receiving specific legal counseling and/or an opinion according to particular circumstances. In any case, we believe it is advisable to examine the legal repercussions ahead of time, prior to taking any action.

Lior Pick & Co.