Avner Oil - Annual Report 2011 - Delek Energy Systems

had not yet been received, although to the best of the Partnership's knowledge, all the conditions toobtain the Commissioner's approval to transfer the rights were fulfilled.On November 29, 2011, the Commissioner notified that the Avia and Keren licenses would not beextended for the following reasons: Non-compliance with the terms of the work plan in theselicenses; the transfer of the rights has not yet been completed until now; an amended applicationwas not filed after the proposed operator resigned and clarifications have not yet been received inlight of the Antitrust Commissioner's notice described in section ‎7.24 below.The Partnership contends that the conditions for obtaining the Commissioner's approval to transferthe rights have been fulfilled and that the delay in the Commissioner's decision caused theproposed operator to resign.On November 16, 2011, the Partnership proposed an alternative operator, Edison InternationalS.P.A. ("Edison") to the Commissioner and requested his earliest approval.Furthermore, on January 30, 2012, the Partnership filed an appeal with the Minister of Energyagainst the Commissioner's decision not to freeze the work plan under the terms of the Avia andKeren licenses and not to extend their validity.On March 19, 2012, the Partnership signed a contingent agreement with Edison for the sale of partof its oil rights in the Avia and Keren licenses according to which, inter alia, the Partnershiptogether with Delek Drilling will transfer 50% (out of 100%) of the Partnership's rights in each of theAvia and Keren licenses, subject to fulfillment of the contingent conditions, including acceptance ofthe appeal filed by the Partnership with the Minister of Energy as set out above and renewal andextension of the Avia and Keren licenses.7.26.11 Rights of the holders of royalty rights transferred in the agreements described insections ‎7.26.9 and ‎7.26.10 above:In addition, the Partnership and the holders of royalty rights as set out in Note 16 to the financialstatements (in this section: "the holders of royalty rights"), have an agreement for the transferred rights,as follows:The holders of royalty rights will be entitled to royalties of 6% of the royalties which the Partnershipis entitled to according to the agreements for the sale of the rights (3% to Cohen Development andIndustrial Building Ltd. and 3% to December. Eliyahu Rosenburg) and the holders of the royaltyrights will also be entitled to their proportionate share of the value of the creditor's rights actuallypaid at a rate equal to the rate of the royalties. It is clarified that is the Partnership decides toconvert the balance of its rights in the licenses to additional royalties as set out above, thearrangement set out above will apply to these royalties.7.27 Legal proceedingsIn the matter of the claim filed at the Tel Aviv district court against Yam Tethys Ltd. and a numberof other defendants, see Note 12J to the financial statements.7.28 Business strategy and objectivesThe Partnership believes that the scope of the significant natural gas resources discovered in theprojects which it is involved in, especially in the Tamar and Leviathan discoveries, along with the oilassets and other explorations that it holds in Israeli and/or Cypriot economic waters, preserve itslead (together with its partners) in its sector of operation in Israel and Cyprus and also includespotential for growth and generation of value.In view of the aforesaid, the Partnership's operating strategy and objectives are to expand andassimilate the use of natural gas in the Israeli economy and supply its needs alongside promotingand developing markets and infrastructures to allow exporting natural gas.7.28.1 Yam Tethys project(A)(B)Maximum production of natural gas from the Mari B reservoir with the aim of bridging thecustomers' requirements until delivery of gas from the Tamar reservoir.Development of the Noa and Leviathan reservoirs of Mari B (Pinnacles), if sufficient qualityand quantity of natural gas is discovered there, using the production facilities of the YamTethys project to assist in bridging the customers' needs.A-185