Lior Pick, Adv. (CPA) and Anna Liskenich, Adv.

Until the day the Instructions were published, the procedure to receive a permit to explore for oil in the land was subject to the provisions of the Oil Law, 5712-1952 (hereinafter: “the Oil Law”), that allowed the first entrepreneur that applied for a permit in a certain area to receive it on a “first come first served” basis.

 The Israeli government’s will and aspiration to establish a competitive, egalitarian procedure to receive permits to explore for oil and produce oil in the land , as is custom in the European Union, was expressed in the Instructions published on 6.11.12 by the oil commissioner (the Ministry of Energy and Water) (above and below: “the Instructions”). As opposed to the previous state, currently, following the applicant’s application to receive a permit from the Ministry of Energy, the commissioner will have to publish information to the public about the requested area, so that other entities (entrepreneurs) will be given an opportunity to file applications to explore for oil in the said area. The suggestions will be examined according to measurements of the quality of the work plan, the quality of experts and so on.

The Instructions establish clear criteria the applicant for the permit must meet to submit the application. Among other things, the applicant must present a professional team that will manage the exploration activities to the commissioner; the team will include at least one Israeli expert whose place of residence and the core of whose business are in Israel. The following professionals must be a part of the team: project manager, geologists, geophysicist, engineer, production engineer (relevant to an area that was already drilled).

In addition, to receive a permit, the applicant will have to prove that it has liquid property and equity at the amount of the cost of performing the work plan without the drilling, and in addition, 50% of the estimated cost of the drill, and no less than 5 million dollars. Also, the applicant will attach a bank guarantee or a guarantee from the insurance company, that will be unconditional at the source, at an amount of ILS 100,000.

As said, after the application will be filed, the commissioner will publish a notice of the borders of the area in which the permit is requested. The publication will be in one Israeli daily paper and on the Ministry of Energy and Water’s website (in Hebrew and English). Within three months of the day of publishing the notice, other entities may submit an application for the said area or a part thereof. All terms and requirements specified in the Instructions apply to requests to be submitted after the publication (professional team and financial ability).

The application will be examined by the oil commissioner and/or the professionals entities on its behalf, according to various measurement; such for example, the weight that will be given to the professional team’s overall experience will be 25%, the extent and quality of the proposed work plan – 25%, considerations of competition – 10%, and so on. The commissioner and/or anyone on its behalf will have their recommendations discussed by the professional committee, and afterward, its recommendations will be discussed before the advising committee. The final decision to give a permit will be made by the oil commissioner.

Our firm specializies in legal and tax-related counseling and accompanying for companies that are active in the fields of gas and oil, hi-tech and investments in Israel and abroad.

Do not transfer and/or distribute that said in this circular to any entity other than the entity to whom the circular is addressed. Do not copy and/or photocopy and/or use this circular in any way without permission in writing and in advance from the undersigned.

This circular is general only. Do not use that said in the circular in any way without receiving an individual opinion and/or professional legal counseling in accordance with the specific circumstances.

Respectfully,

Lior Pick and Co., Law Offices