1E9Ct5D

The Laws Governing the Israeli Oil and Gas IndustryThe Israel Petroleum Law (1952) (the “Law”) and subsequent amendments andregulations governs the exploration and production of petroleum in Israel,including the continental shelf. The competent authority that grants licenses is, inmost cases, the Ministry of National Infrastructure while applications forpetroleum rights are submitted to the Petroleum Commissioner.Under the Law, “Petroleum” is defined as “any petroleum fluid, whether liquid orgaseous, and includes oil, natural gas, natural gasoline, condensates and relatedfluid hydrocarbons, and also asphalt and other solid petroleum hydrocarbonswhen dissolved in and producible with fluid petroleum”.Petroleum resources belong to the State of Israel, whether or not located on statelands. No person is allowed to explore for or produce petroleum withoutreceiving a right under the Law. The Law provides for three types of rights, tworelevant to the exploration stage and the third relates to production.Preliminary PermitThe lowest level right is the preliminary permit, which may be granted for a periodnot exceeding 18 months. The permit allows the prospector to conductpreliminary investigations, except for test drilling, to ascertain the prospects fordiscovering petroleum in the area covered by the permit. The recipient of apreliminary permit is entitled to request a priority right on the permit area, which,if granted, prevents the awarding of any other petroleum right in the area. Thereare no statutory restrictions as to the maximum size of the permit area or to thenumber of permits which may be held by a prospector, however the policy is toaward no larger an area than that which the applicant has a reasonable plan ofoperation and has demonstrated possession of the necessary financial resourcesto execute the plan.LicenseThe second type of right is the license, which provides an exclusive right toundertake further exploration work, requiring the drilling of test wells. The initialterm of a license is up to three years and may be extended for up to an additionalfour years. A license area may not exceed 400,000 dunams (approximately100,000 acres).