Oil & Gas

Author:Mr Simon A. Weintraub and Avi Anouchi
Profession:Yigal Arnon & Co
 
FREE EXCERPT
  1. Does your jurisdiction have an established upstream oil and gas industry? What are the current production levels and what are the oil and gas reserve levels?

    The State of Israel was established in 1948. In its early days, Israel's oil industry had some modest success. The first oilfield, Heletz, was discovered in 1955, and yielded 17.2 million barrels of oil. Unfortunately, only small amounts of oil have been discovered since then, though the exploration continues, with the hope of discovering more fields.

    Israel's natural gas industry was set up in 1999 with the discovery of the Noa reservoir off the coast of Ashkelon by the Yam Tethys partnership. A few months later another reservoir, Mari B, was discovered. It was estimated that these reserves held about 45 billion cubic meters (bcm) of natural gas, which provided a limited amount of natural gas to the Israeli market and primarily to the Israeli Electric Corporation, its main customer. Today, these fields are nearly depleted. More fields have been discovered since then, chief among them are the Tamar field off the coast of Haifa, holding an estimated 283 bcm of natural gas, which commenced commercial production in April 2013, and another maritime reservoir, the Leviathan field (535 bcm), which commenced commercial production at the end of December 2019, as well as the Karish and Tanin fields that are set to start production in 2021. Due to these discoveries, a significant portion of Israel's natural gas demand is now met by local production, independent of foreign import. As of March 2019, Israel estimates that its seabed contains 75 trillion cub feet of gas and 6.6 billion barrels of oil.

  2. How are rights to explore and exploit oil and gas resources granted? Please provide a brief overview of the structure of the regulatory regime for upstream oil and gas. Is the regime the same for both onshore and offshore?

    The petroleum sector in Israel is regulated by way of two primary laws: the Petroleum Law, 1952 (the "Petroleum Law") including the Petroleum Regulations, 1953 promulgated thereunder (the "Petroleum Regulations") and the Natural Gas Sector Law, 2002 (the "NG Law").

    The Petroleum Law governs and regulates Israeli upstream activities (onshore and offshore) with respect to exploration and production of petroleum, broadly defined in the Petroleum Law as: petroleum fluid, whether liquid or gaseous and oil, natural gas, natural gasoline, condensates and related fluid hydrocarbons and also asphalt and other solid petroleum hydrocarbons when dissolved in and producible with petroleum fluid.

    The NG Law governs the midstream and downstream activities and sets out a licensing regime for Israeli natural gas infrastructure, including distribution, transmission, storage and LNG facilities. For more details see question 17.

    All petroleum resources in Israel and its continental shelf belong to the state. The Petroleum Law provides that no person may explore for petroleum without a preliminary permit, license or lease, and no person may produce petroleum without a license or lease.

    The Petroleum Law falls under the jurisdiction of the Minister of National Infrastructures, Energy and Water Resources (the "Energy Minister") who in turn is tasked with appointing a Petroleum Commissioner (the "Petroleum Commissioner") to be responsible for matters related to oil and gas exploration within the territory of Israel, in conjunction with the Petroleum Council that advises the Energy Minister and the Petroleum Commissioner (the "Petroleum Council"). The Petroleum Council is comprised of 15 members, with at least seven representing the public and is required to meet at least four times a year.

  3. What are the key features of the licence/production sharing contract/concession/other pursuant to which oil and gas companies undertake oil and gas exploration and exploitation?

    The Petroleum Commissioner, in consultation with the Petroleum Council, is responsible for all matters relating to the licensing regime. There are three main rights that may be

    granted under the Petroleum Law: a preliminary permit, a license and a lease. Such grants are all recorded in the Petroleum Register by the Petroleum Commissioner and are part of the public record.

    A preliminary permit confers on its holder the right to carry out preliminary testing investigations, not including test drilling, in order to ascertain the prospects for discovering petroleum. The Energy Minister may grant a permit holder priority rights for the receipt of a license in the permit area for a period of up to 18 months.

    A license confers upon the licensee: the right to explore for petroleum in the license area (such area is defined in the license and is limited to a maximum area of 400 square kilometers) and outside such area in certain...

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