Eilat Conference May 27, 2013 FARMOUT AGREEMENTS OF PETROLEUM RIGHTS IN ISRAEL

 Farmout Agreement 1998  Noa discovered 1999  Mari-B discovered 2000  Andromeda dry 2001  Initial IEC contract 2002 First Gas Sales 2004 o Created Israel’s natural gas industry  Tamar and Leviathan Farmin 2007 and 2008  Tamar and Dalit discoveries in 2009 o 250 BCM - 20 years supply  Leviathan discovery in 2010 o 480 BCM – export project  Cyprus A, Dolphin discoveries in 2011, Tanin in 2012 Noble in the Eastern Mediterranean

Supplies fuel for one-third of Israel’s electricity generation  Over NIS 26 Billion in total savings since 2004  Saved 17 million metric tons of CO2 emissions to date New Existing Pipeline Planned Pipeline IEC Natural Gas Consumption, BCMA Power plant conversions Mari–B Field

4 FARMOUT AGREEMENTS Who are my new Partners?  Reputation/FCPA  Financial Capabilities  Strategic relationships (AMI’s, Marketing)  Professional compatibility  Operatorship 4

5 Farmout Agreement What is the right being acquired?  Due Diligence/Compliance  Title (is it in rem? )  How does title get transferred?  Property Rights (domestic law and BIT protections)  When does the right expire/terminate? 5

6 Theoretical Timeline JanuaryFebruaryMarchAprilMayJune Diligence FOA Negotiations Seek Board Approval Seek Gov’t Approvals Transaction Closing 6

Risk Management Managing investment risks? – Due Diligence/Compliance/Legal Opinions – Retained liabilities – Milestone/Royalty payments – Tax rulings – BIT protection – Conditions Precedent to Closing  Governmental Approvals (Assignment, Antitrust)  Third Party Consents (JV Partners, Banks, etc.)  Execution of ancillary documents (JOA amendments/Novation/Royalty Deeds) 7

Governing Law/Dispute Resolution Usually non-Israeli law Expert Determination/Arbitration LCIA/ICC 1/3 Arbitrators 8

Regulatory Framework Petroleum Law enacted in 1952 Material impact on Israeli economy Updating the regulatory framework creates uncertainty in the short term that impacts the commercial discussions and the risk matrix (assignment regulations, lease terms, export approvals, antitrust, etc.) 9