Dr. Michael Gardosh Director of G&G MEWR Exploration and Production Update- Australian Gas & Energy Trade Delegation To Israel June 2013 Dr. Michael Gardosh Director of G&G MEWR June 2013

Hydrocarbons are Exploited in Israel Since Biblical Time….. Asphalt Block Near the Dead Sea Shore Hydrocarbons are Exploited in Israel Since Biblical Time…..

Drilling History (1950-2012) More than 500 oil and gas wells have been drilled, about 40 of them offshore. First onshore oil discovery - Helez field in 1955. Oil shows were discovered offshore in 1990th. First offshore gas discovery - Noa field in 1999. Two giant gas fields- Tamar and Leviathan, were discovered in 2009-2010.

Oil and Gas Fields in Israel (2013) 9 gas fields were discovered offshore 3 gas fields were developed and producing (MariB, Noa, Tamar) 1gas field is producing onshore (Zohar) 5 oil fields were discovered onshore, 2 are producing (Helez, Meged) Onshore production is minor Oil Field Gas Field Leviathan Tamar Dalit Noa MariB Aphrodite Dolphin Tanin Shimshon Meged Helez Zuk Tamrur Ashdod Emunah Zohar

Exploration Activity in the Levantine Basin Israel offshore EEZ covers ~45% of the offshore part of the Levant Basin Province (~ 25,000 km2) There is an official maritime border agreement with Cyprus and unofficial one with Egypt and the Palestinian Authority The Lebanease-Israeli border is under dispute, but Israel has not granted petroleum rights in the disputed area Cyprus completed its second offshore bid round in 2012 and drilled 1 well (Aphrodite-1) Lebanon completed a pre-qualification stage for its bidding round in 2013 Israeli EEZ A USGS assessment report from 2010 estimates the recoverable oil and gas resources in the Israeli portion of Levantine Basin Province at about 50-60 TCF of gas and 1 BBO of oil Source: USGS, 2010

Offshore exploration drilling after Noa gas discovery 18 exploration wells have been drilled following Noa gas discovery in 1999. New major gas fields (Tamar, Leviathan, Aphrodite) are found at total depth of more than 5 km, at water depth that exceeds 1.5 km, 90-160 km from the shore. Offshore exploration drilling success rate after the Noa discovery is 61 % (for sub-salt targets – 70%). Sub-salt exploration well density is ~ 1 well per 2,000 sq.

Ongoing Exploration Activities 34 licenses and 4 leases are active offshore Israel. Wells under drilling: Karish-1 well, target - gas in Miocene-Oligocene sandstones. Prospective resources – 57 BCM. Operator – Noble Energy. Yam-3 well, target – oil in Jurassic carbonate rocks. Contingent resources – 120 MMbbl. Operator - Caspian Drilling Company. Two new exploration licenses, Royee and Neta, were granted in April 2013. Operator – Edison International. More than 10 prospects are ready for drilling within the existing licenses. Offshore areas which are not covered by active petroleum rights are closed for exploration and production by the Minister of Energy.

Exploration Targets in the Levantine Basin Yam Yafo-1 Depth (km) Plio-Pleistocene Precambrian Permian-M. Jurassic M. Jurassic-M. Cretaceous Senonian-Eocene Oligocene-L. Miocene E W M.-U. Miocene Messinian (Evaporites) Shallow gas in Pliocene turbidite sands (Yafo Play) Messinian Salt Sub-salt gas in Oligo-Miocene turbidite sands (Tamar Play) Oil in Jurassic carbonates near the shore (Yam Play) Potential oil in Cretaceous and Jurassic rocks In the center of the basin (Leviathan Deep Play) Oil Play Gas Play

Messinian Unconformity The Yafo Gas Play A The Yafo Fan Complex B Plio-Pleistocene Miocene Yafo Sand Mbr. 5 km 1 2 3 Time (sec) Messinian Unconformity Noa Or MariB Nir Fig. 14 A B Flat Spot 1st regional profile Close up seismic Main Elements : Type: Dry, Biogenic Gas Source: Unknown, possibly Late Tertiary Marl+ saproples Reservoir: L. Pliocene (Yafo Sand) 10-250 m net pay , Porosity-25-28 % , Perm. ~1-2d Trap: Sand lobes + sand mound complexes Resrvoir Depth: 1800-2000m 9 9

The Tamar Gas Play Flat Spot Bat Sheva Seminar 2013 Tamar-4 Dalit-1 Messinian Evaporite Near Top Tamar Sands A B B Flat Spot A Main Elements : Type: Dry, mostly biogenic gas Source: Unknown, possibly Late Tertiary organic-rich Marl + saproples Reservoir: U. Oligocene-L. Miocen Tamar Sand (A,B,C,D), 30-140 m net pay Av. porosity 25%, Perm. 0.5-1 d Trap: Syrian Arc Folds and uplifted blocks Reservoir Depth: 4500-5000m Bat Sheva Seminar 2013

The Tamar Gas Play- Shimshon Submarine Fan The Tamar field The Tamar Gas Play- Shimshon Submarine Fan Messinian M. U. Miocene Oligocene- L. Miocene Pliocene 10 km Amplitude Extraction Map Afiq Canyon 3D Survey AShdod Canyon 2D line Tamar Sands Shimshon-1 Fig. 12

The Yam Oil Play B A A B Permian- L. Jurassic Yam West-1 (Proj. 2km SW) Yam-2 A B 5 km TWT (ms) Senonian -Eocene Permian- L. Jurassic M. Jurassic—M. Cretaceous M.-U. Miocene Precambrian AC. Gas Show Oil Show Hydrocarbon Migration Main Elements: Type: Light oil (440 -470API) and gas Source: Unknown, Possibly Triassic-L. Jurassic Reservoir: Mid Jurassic carbonate + L. Cretaceous siliciclastic gravity flows Trap: Syrian Arc folds Reservoir Depth: 4000-5500m Bat Sheva Seminar 2013

The Leviathan Deep Oil Play Leviatan-1 Messinian Salt Middle-Upper Miocene Oligocene-Lower Miocene Upper Ceraceous Magmatics ? Jurassios- Ceraceous Leviathan-1 was suspended at depth of 6,500m without reaching the potential, deep oil targets. A new well will be drilled in 2014 Tamar Gas Oil ?

Israel Offshore Gas and Oil Reserves and Resources (April 2013) Proved + Probable Gas Reserves (2P) (Tamar + other fields) – 285 Bcm Contingent Gas Resources (2C) (Leviathan + Tanin+ other fields) – 533 Bcm Prospective Gas Resources (undrilled prospects) – 440 Bcm Contingent Oil Resources (2C) – 230 MMbbl Prospective Oil Resources (Leviathan) – more than 1,000 MMbbl

Natural Gas Transmission System Two operational gas routes into Israel, MariB-Noa and Tamar Two natural gas onshore treatment terminals , Ashdod and Ashqelon Onshore gas transmission system is almost entirely installed. Single state-owned licensee (INGL) with a single mission in the energy sector. Full open-access from day one and uniform regulated tariff (independent of distance) Low pressure distribution network (up to 16 bar) operated by private companies.

Tamar gas field Located 90 km offshore Israel at water depth of ~ 1,700 m. Proved + probable reserves (2P) – 282 Bcm. Longest subsea tieback in the world - 150 km. Phase 1 of field development completed: 5 subsea production wells, capable of flowing 250 MMcf/d of gas each. Commencement of production – March 30, 2013. Current sales – 550 MMcf/d, expected to average 700 MMcf/d at 2013. Phase 1 maximum gas production ~ 1bcf/d (up to ~1.5 bcf/d with compression and gas storage). FEED assessment for FLNG is underway (subject to the government approval for gas export).

Tamar gas field pipelines''16 km of 2X150 Tamar platform Ashdod Treatment plant Mari B platform

Mari-B and Tamar Production Platforms pipelines''16 km of 2X150 Tamar platform 30'' pipeline Ashdod Treatment plant Mari B platform

Leviathan gas field Located ~ 130 km offshore Israel at water depth of ~ 1,600 m. Contingent resources (2C) – 485 Bcm. Field development with FPSO. Initial production to the domestic gas market in 2016. Woodside has reached an agreement to acquire 30% interest in the Leviathan field and will be the operator for any LNG development of the field. Leviathan field will be connected to the northern part of Israel. Two new natural gas treatment facilities are planned that will include offshore and onshore installations. Approvals are expected in 2014 Planning and surveying of the Leviathan pipeline route is underway

Leviathan gas field

Israel economy– fossil fuel mix

Natural Gas Supply in 2004-2013 (bcm) (NGA)

Israel Natural Gas Demand, 2010-2040 (bcm) (Natural Gas Authority Forecast) 26.6 23.1 20.6 16.7 13.3 BCM Total: 9.7 19

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Government Policy The Prime Minister and the Minister of Energy and Water Resources appointed an inter-ministerial Committee to examine the government's policy regarding natural gas in Israel. In August 2012 the Committee submitted final recommendations to the government. Key principles of the government policy: Ensuring Israel’s energy independence and security of supply; Ensuring competition in the natural gas market; Creating investment and business opportunities, ensuring stability for the players in the natural gas market. Improving the regulatory system

Government Policy (cont.) Supply of natural gas for the domestic market must be guaranteed for 25 years. Israel's total natural gas consumption for 25 years period is estimated at about 450 bcm. Gas export will be allowed up to 500 bcm. All gas fields on Israel's territory or in its EEZ will be connected to the national gas transmission network. The government will be involved in planning and construction of gas transmission and treatment infrastructures.

Government policy (cont.) Export licenses will be granted by the Minister of Energy and Water Resources for a period of 25 years. Special measures will be undertaken to encourage the development of small and medium-sized gas fields. The government policy is to encourage the entrance of major international oil and gas companies to Israel. Government decision regarding the Committee recommendations is expected in June 2013

Gas Export Options There is an absolute preference for export of Israeli natural gas from an export facility (onshore or offshore) located within the Israeli territory (including EEZ). Export from facilities located outside Israel such as in Cyprus will be allowed only in the framework of bilateral agreements between the countries. Preferable options for export are through an onshore LNG located on Israel’s Mediterranean coast, floating LNG and a pipeline (Jordan?).

Investment and Business Opportunities Many offshore licensed areas have not been drilled yet and there are prospects that are ready for drilling in more than 10 licenses. IOC’s such as Edison and Woodside are in the process of acquiring interest in the offshore area Leviathan field. Acquiring rights in the existing licenses as an operator or non-operator is an effective way to join the exploration and production activities offshore Israel. Recent discoveries and planned government involvement in gas infrastructure projects present significant opportunities for companies specializing in construction and operation of gas transmission and treatment facilities, LNG plants, etc. The offshore areas is presently “closed”. It is expected to be open for new exploration and production through a tendering process in coming years.

Thank you for your visit In the land of Milk, Honey, Gas and Oil……