06.01.2010

Generally reserves refer to the volume of technically and commercially recoverable hydrocarbons in an oil and/or gas reservoir (as opposed to the total volume of oil or gas in place, much of which may not be recoverable using current technology and in current market conditions). According to the Society of Petroleum Engineers, reserves are “those quantities of petroleum claimed to be commercially recoverable by application of development projects to known accumulations under defined conditions.” There are three major classifications of reserves: proven/proved, probable and possible.

The term is not to be confused with resources, which denotes oil and gas that may be present, such as when conditions appear to be geologically favorable even though there is no specific data supporting the estimate.

Any site which has not yet been drilled can only be categorized as potential resources and not potential reserves.

There are two categories of resources: contingent and prospective.

Contingent resources are quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the projects are not yet considered mature enough for commercial development due to one or more contingencies.

The daily spot market for natural gas is active, and trading can occur 24 hours a day, seven days a week. However, in the natural gas market, the largest volume of trading occurs in the last week of every month. Known as ‘bid week’, this is when producers are trying to sell their core production and consumers are trying to buy for their core natural gas needs for the upcoming month. The core natural gas supply or demand is not expected to change; producers know they will have that much natural gas over the next month, and consumers know that they will require that much natural gas over the next month. The average prices set during bid week are commonly the prices used in physical contracts.

End of month period when cash transactions are carried out for the next month.

Method for testing of pipeline welds that is superior to the regular NDT non-destructive testing or radiography. AUT inspection utilizes techniques with zoned inspection and time of flight diffraction (ToFD) techniques. The system provides an adequate number of inspection channels and is designed with sufficient beam overlap to ensure the complete volumetric examination of the weld through thickness. The system includes a fully automated recording system to indicate the location of imperfections and the effectiveness of the acoustic coupling. A scribe tool is provided to scribe the band side of pipe ends with a permanent mark completely around the circumference for determining positioning of the scanning band. AUT calibration blocks are designed to permit detection and sizing of indications in conformance with project specific codes and/or standards. A separate calibration block is required for each pipe diameter, thickness and weld bevel configuration. Calibration shall be performed prior to the start of the inspection and/or every time a technique is loaded.

05.01.2010

During the first half of 2004, the Natural Gas Authority conducted a survey to identify present and future natural gas consumers. As part of the survey, 2000 potential customers and plants were sampled, within a radius of 30 km from the transmission system, according to National Outline Plan 37.

The MNI estimates that demand for gas in 2014 both from IEC and/or IPPs as well as from industrial users will be between 10.5 – 12.5 bcm.

Other experts believe that consumption will reach 7 bcm by 2015 and 10 bcm by 2020-2025.

In a conference in December 2009, MNI Minister Uzi Landau stated that that since the new discoveries offshore Israel had been made that the forecast of consumption for 2030 and been revised to 15 bcm per year rather than then originally quoted figure of 10 bcm.

In 2010, Clal Finance says they have spent considerable time trying to decipher the Israel gas market for supply and demand and after an examination of IEC’s books and an analysis of their development plans for the next few years they believe that IEC is expected to double their demand for natural gas and that by 2013 IEC’s generation capacity generated by natural gas will grow from 3,600 MW at the end of 2009 to about 7,600 MW at the beginning of 2013. Clal believes that even if the coal power station D gets established it will not be available before 2015 and thus it will not influence the consumption of natural gas at the beginning of the decade. Clal believes that the Tamar gas field alone will be supplying 8 bcm by 2015, up from the previously anticipated 6 bcm by this date and that total demand will be between 12-14 bcm in 2014.

According to the Rand Corporation Report in 2010 entitled” How Large a Role for Natural Gas?”

Given the uncertainties about future demand, relative fuel prices, possible policies such as carbon emissions charges, and technological changes, we compared how several energy strategies would perform under widely varying conditions. In all cases, we assessed the strategies against three criteria of concern: total cost through 2030, greenhouse emissions in 2030, and land area required for generating electricity. We set acceptable thresholds for each criterion and judged the strategies based on how well they performed across 1,400 future states of the world that we generated by varying the assumptions about future demand, prices, technologies, policies, and external developments. The 1,400 scenarios of the future represent the uncertainty facing Israeli policymakers.

We began with simple strategies, observed how they failed in certain scenarios, and modified them to be more robust. We found that making the strategies inherently adaptive — that is, subject to modification based on external triggers — led to more-successful outcomes.

Initially, this process yielded seven strategies. The first (or “baseline”) strategy represents a typical approach to planning: It seeks an optimal outcome based upon forecasts of future demand and is not adaptive. We then tried three adaptive strategies. One (Least Cost) always seeks the least-cost solution. Another (Less Natural Gas) seeks to minimize the effects of possible cutoffs of natural-gas supply. The third (More Natural Gas) is more concerned with utilizing the domestic resource. Each of these three exists in two forms: one that allows for the construction of renewable, non–fossil-fuel generating capacity and for enhanced conservation, and another that does not.

We found strong evidence that managing electricity demand and using several energy sources, particularly non–fossil-fuel alternatives, raised the success rates. When demand is left unchecked and follows the high-growth assumptions of the baseline forecasts, it becomes quite difficult to choose any strategy that will meet the nation’s goals for cost, emissions, and land use.

Figure 4 compares the results of the baseline strategy with those of the three modified adaptive ones. We label the latter strategies LCC (Least Cost + Conservation), LessNGRC (Less Natural Gas + Renewables + Conservation), and MoreNGRC (More Natural Gas + Renewables + Conservation). The figure shows that MoreNGRC — a strategy that does not shy from expanded use of natural gas in Israel — could be both consistent with Israel’s interests and relatively robust across many plausible futures. MoreNGRC succeeds in meeting the cost threshold almost as well as LCC while at least matching the other strategies in emissions and land use. Israeli analysts will have access to the full database of scenario outcomes and will be able to explore this finding in greater detail.

In October 2010, Nira Shamir the head economist of Discount estimates that the total needs of the Israeli gas market for natural gas for the next 20 years will be 230 bcm compared to a potential of discoveries of about 700 bcm.

Dec 2010 – MNI press statement regarding growth of natural gas consumption in Israel – growth of 23% in natural gas consumption in the Israeli market in 2010 to 5.2 bcm during the year and the estimation is that growth will double in the next decade. Over 60% of this was supplied by Yam Tethys and the remainder by EMG. About 90% of this gas was consumed by IEC and the remainder by the Oil Refinery in Ashdod, the IPP by the water desalination plant in Ashkelon, by the Dead Sea Works, by the Hadera Paper Mills and by the Nesher Cement enterprise. In 2006, consumption is expected to reach 6 bcm with most of the growth coming due to the link up of new consumers in the north such as the Haifa p.s., the Alon Tavor p.s. and the Haifa Oil Refinery.

January 2011 – MNI Press statement – increase of 19% in the use of natural gas for the generation of electricity in 2010. MNI data shows that in 2010 56.5 TWH were produced, an increase of about 6% compared to 2009 which saw 53.3 TWh of electricity generation and all of the increase came from natural gas generated electricity, so that 20.4 TWhrs were produced by natural gas in 2010. Coal generation in 2010 was identical to 2009 and thus its share in the fuel mix decreased by 3.6%

Demand for natural gas in Israel:
• IEC
o Stations that are currently operating on natural gas: Eshkol (Ashdod); Reading, Gezer (Ramle), Hagit (Yokneam)
o Stations in the process of being built and/or connected to gas – Kfar Menachem, Ramat Hovav, Alon Tavor, Haifa
o The GoI approved the plans to construct D p.s. in Ashkelon to be a dual fuel (gas and coal station)
o About 10 additional power station are expected to be set up on natural gas for a total capacity of 5,000 MW
o The MNI minister ordered IEC to convert the Orot Rabin A (4 units of1,400 MW) from coal to natural gas as of 2015
• IPPs
o The GoI determined that 20% of electricity will come from natural gas operated IPPs: Dorad, Delek desalination plant in Ashkelon, Delek Ramat Gavriel, Delek Alon Tavor, Nesher, Ashdod Oil Refinery, Haifa Oil Refinery, Ramat Hovav IPP, Dalia Energy, Dor Alon Kiryat Gat and others.
• Heavy Industrial users
o Natural gas as raw material (Ashdod oil refinery, Hadera Paper Mills, Israel Chemicals, Agan Plant in Ashdod, Mahteshim, etc.)
• Natural Gas Distribution network
o Natural gas is planned to reach most of the industrial areas in the country via 5 distribution networks

2011 – Yam Tethys higher consumption by 31% and EMG lower by 67% (EMG delivered gas for 137 days in 2011) over 2010

IEC consumed 4.07 BCM of gas in 2011, 82% of Israel’s total gas consumption.

Two more IEC power stations were hooked up to the national gas pipeline network during the year: Haifa, and Alon Tavor in the Galilee.

Six private sector consumers also hooked up to the pipeline network last year: Israel Chemicals (ICL) units Rotem Amfert Negev and Periclase in the Negev; Haifa Chemicals Ltd’s plant at Mishor Rotem in the Negev; Oil Refineries (ORL) in Haifa; Makhteshim Agan Industries Ltd. plants in Ashdod and at Ramat Hovav in the Negev. By the end of 2011, 11 private sector consumers were hooked up to the gas pipeline network, and they consumed 900 million cubic meters of gas, 54% more than in 2010.

In July 2008, Israel’s Public Utilities Authority agreed to feed-in tariff of NIS 2.01 for small solar-power arrays of between 15 to 50 kW in the trade and agriculture sector or four times the average consumer price for entities that got a license in 2008. Those that start in 2009, the tariff has been decreased to 1.97 NIS per kwH.

In December 2009 The PUA approved the arrangement for medium size solar facilities of the PV type from 50 KW to 10 MW at a tariff of 1.49 NIS per KwH. The total maximum scope for such medium size facilities is up to 300 MW that is to be fulfilled gradually by 2014. Should there be greater demand during any given year it will be approved but at a different lower tariff. The tariff will also be reduced by 5% each year as of 2012. The PUA will require proof of financial capability of 20% of the project (a 5 MW solar field will cost about 100-120 million shekels), rights on land of at least 8 dunam for each MW of installed capacity, experience and supplying a bank guarantee of 5%. To set up such a facility, the companies will require to receive a generation license from the PUA.

In February 2010, the MNI approved the scope for setting up small solar system on the roofs of structures in the periphery up until 2014. These are systems of up to 50 KW with an unlimited scope for putting such systems on rooftops. The tariff for these facilities is 2.05 NIS. A limit of 30 MWs however have been placed on public structures, with emphasis on educational facilities.

July 2010 – The PUA approved the first eight licenses for mid-sized solar energy facilities of 50 kilowatts to 5 megawatts each, which will be placed on roofs of malls. Most of the solar power facilities built in Israel to date have been small facilities of up to 50 kilowatts, which do not need a license. Tariff has been set at NIS 1.49 per kilowatt/hour, which will be gradually reduced over several years. The Public Utilities Authority has set a quota of 300 megawatts for mid-sized solar facilities.

The injection rate is the volume of gas that can be put into storage over a period and is dependent on the physical attributions of each type of storage.

Geological storage is most flexible and can cope with maximum injection rates from just 10% full to 80%-90% full.

04.01.2010

The Israeli law allows a group to join up in a number of different frameworks: the best known manner is a limited company. In the oil and gas business it is common to link up as a limited partnership instead and thus they are traded as participation units and not as shares. Nevertheless, the stock exchange practice is the same in both cases. Both papers have a price and the manner of trading them is similar. From the practical point of view, participation units in this field are often called oil and gas shares.
A limited partnership is a legal structure that includes the entrepreneur-managing partner known as the general partner and the public that invests in the company known as the limited partners. Once they are set up and have a petroleum right, it is necessary for them to raise the funds to carry out the drilling work which is done through a rights issue on the stock exchange to raise the funds with the public.
The general partner needs to buy 25% of the issue or at least 12 million shekels worth, the lesser of the two.

A limited partnership have to pay out/share out profits with their shareholders. This is not the case for instance with an Ltd.

The partnership structure includes the general partner who manages the partnership and a limited partner who issues the participation units. The general partner is entitled to a management fee from the partnership. The limited partner is regarded as the entity that brings in funds to the partnership when the connections is made – either money or an asset that has a certain value – so that he has no greater obligation than the sum that he has invested into the partnership. The partnership’s proceedings are easier from the legal point of view than that of a “regular” company, but its disadvantage is that its members are liable for the debts of the whole partnership up until the ceiling of the sum that was invested. This, contrary to a company where there is a distinction between the company and the holders of control within it and each entity is defined as a separate legal entity.

The different company structures:

The partnership agreement – This agreement usually relates to the objectives of the limited partnership, its authority and the special projects that he can only deal with and invest in; the expenses of the limited partnership, the functions and responsibilities of the general partner and the partners share in the partnership equity; payments of the partnership to the general partner and to its persons of interest; the limited responsibility of the limited partnership; competition in the partnership and limitation of deals with the general partners and persons of interest in it; the period of the limited partnership; changes in the partnership agreement; the departure of the general partner from his functions; the dissolution of the partnership; the division of profits by the partnership and other.

The partnership was established and operates based on two agreements. The establishment of the partnership is done based on the partnership agreement between two partners: the general partner and the limited partner.

Contrary to public companies, in these types of partnerships the ability of investors from amongst the pubic to present their views and to influence management decisions of the general partner, is most limited and practically these are limited to a very few issues that are brought to the vote at a meeting of owners of participation units, such as changes in the partnership agreement, increasing the partnership equity by issuing more units, merging of units, changes in the objectives of the partnership, ending the partnership and in some of the cases, depending on the partnership agreement, approval of the entering into deals with parties of interest.

Because of the structure of these partnerships, contrary to all other companies Ltd. it is not possible for anyone to gain control over these companies by purchasing a large block of shares, since regardless of how few shares the general partner holds, he has full control over the partnership.

The general partner – usually a private entity (company Ltd) owned by an entrepreneur. The general partner holds a minority of rights in the equity of the partnership, deals with the management of the partnership, and he is the entity that is putting forth the partnership’s prospectus. He is the entity authorized to conduct negotiations and to sign in the name of the partnership on all the agreements required to manage the business at hand. The general partner needs to buy 25% of the issue or at least 12 million shekels worth, the lesser of the two. He is entitled to a management fee which is often a fix fee and a percentage of expenses.
The general partner is in turn controlled by the entrepreneur who sets the ball rolling. These are the people responsible for leading to the partnership’s incorporation, to bring the professional people into the group and bring content to the partnership by buying assets (usually oil and gas rights) and are the entities that organize matters for the IPO to the public in order to raise the necessary funds to pay for the partnership’s operations.

The limited partner is not involved in the partnerships commitments/debts and the risk that he takes is limited to the investment that he has made in the partnership equity, and it is the limited partner that holds the majority of the participation units. In accordance with the rate of holdings in the partnership equity, each partner’s share in the rights to profits of the partnership is determined (if there such be any profits). In accordance with the Partnership Ordinance (New Version) 1975 the limited partner will not participate in the management of the partnership’s business and he has no powers to enforce anything on the partnership.
The limited partners is also called trustee because he holds participation units in the rights of the limited partnership in trust for the public.

Adira Energy Ltd. is a listed Canadian domiciled, oil & gas exploration and development company.

The main investors in Adira are the BRM Group of Eli Barkat, the Lapidot Group of Helman Aldubi, the Investment Fund Quantum Partners, managed by Soros Fund Management that belongs to the billionaire George Soros who invested $6.5 million in the company

Adira Energy has been granted petroleum licenses on and offshore Israel:

“Eitan License” covering 31,060 acres (125,700 dunam) in the Hula Valley located in northern Israel with indications of natural gas*. License issued in December 2008 for initial 3 years renewable for a further 4 years.

“Gabriella License” covering 97,000 acres (392,000 dunam) approx. 10km offshore Israel between Netanya and Ashdod, with indications of oil. License issued in July 2009 for initial 3 years renewable for a further 4 years.

“Yitzhak License” covering 31,555 acres (127,700 dunam) approx. 17km offshore Israel between Hadera and Netanya, directly to the North of and contiguous to “Gabriella License”, with indications of oil*. License issued in October 2009 for initial 3 years renewable for a further 4 years.

In the June 2010 Petroleum Council, Adira was also granted part of the Samuel License. About the Samuel License – The Samuel License area is located adjacent to the coast of Israel and runs between Ashkelon and Bat Yam. The Samuel License is contiguous and south east of the Company’s Gabriella License. The license area is in shallow water with many of the key targets in less than 100 meters of water. Shallow water drilling significantly decreases drilling costs and operating risks and allows the Company to make use of jack up rigs. The prospects are located along the existing Mari B pipeline and close to shore providing a significant cost and time savings in the full development of this prospect. The Samuel License has been granted for an initial period of three years.