Oil Discovery at the Ma’anit-Rehoboth #2?
December 23, 2009
Earlier this month Zion Oil & Gas, Inc. brought the company’s first oil discovery to the surface at the Ma’anit-Rehoboth #2 well. At this point Zion isn’t saying exactly what this discovery means because, frankly, they don’t know; more testing needs to be done to determine whether or not the well is commercially viable (enough oil to make a commercially productive well).
One thing Zion Oil, and now the world, does know – there’s oil at the bottom of the Ma’anit-Rehoboth #2 well; even if it’s just the bottle Zion Oil Drilling Manager John McKenny is holding in the photo released soon after the ‘discovery.’ Zion, however, would have to be awfully lucky to drill nearly three and a half miles into the earth and hit the only quart of oil in Northern Israel. Chances are there’s more down there than the sample in the photos. How much more is yet to be determined.
In his recent company newsletter Zion Oil & Gas CEO Richard Rinberg announced that, ‘we retrieved a small quantity of crude oil‘ during swabbing operations at the Ma’anit-Rehoboth #2. Rinberg stated that they believe the oil samples came from the ‘uncased’ portion of the well, below 4,825 meters (15,830 ft.). According to the December 18 newsletter, “… as we do not have zonal isolation in the open hole section of the well, we released the workover rig during the past week and are now evaluating the next steps that we can or should take in order to test the zones of interest individually.”
What can we take away from what’s been stated in company newsletters in the last few months?
1. The Ma’anit-Rehoboth #2 contains three zones below 15,830 feet that “warrant completion testing” (Zion newsletter 11/08/2009).
2. The Ma’anit #1 was only drilled to a depth of 15,500 feet, making the three zones below 15,830 feet at a depth previously not explored by Zion during the Ma’anit #1 operation.
2. The oil samples announced on December 11 came from the area of those three deep zones, but since the well is only cased to 15,830 feet Zion doesn’t know which zone(s) of interest the samples originated from (Zion newsletter December 18).
3. Zion has released the workover (testing) rig at the Ma’anit-Rehoboth #2 site (Zion newsletter December 18).
4. Zion is “now evaluating the next steps that we can or should take in order to test the zones of interest individually.” (Zion newsletter December 18)
5. According to Rinberg: “It is currently anticipated that we will not resume testing procedures on the Ma’anit-Rehoboth #2 well until after March 2010.” (Zion newsletter December 18)
6. Out of an available 327,000 acres of exploration area, Zion’s next planned drilling location is within the Ma’anit structure, just a kilometer from the Ma’anit-Rehoboth #2. (Zion newsletter 12/11/2009)
Translation?
Zion “retrieved a small quantity of crude oil” during swabbing operations below 15,830 feet in an uncased section of the well that contains three zones that “warrant completion testing.” Because the hole is ‘open’ (uncased) they can’t isolate which zone(s) the oil they’ve brought to the surface originated. They’re “now evaluating the next steps that we can or should take in order to test the zones of interest individually.” But they’ve released the testing rig and don’t plan to resume testing until after March of next year. The next well is planned for the same structure on which the Ma’anit-Rehoboth #2 sits.
(We’re crossing over into a little speculation on my part here … not much, but a little. My analysis comes only from the information Zion has given given us in their public documents, as I’ve listed above).
Whatever Zion has ‘discovered’ at the bottom of the Ma’anit-Rehoboth #2, it isn’t (in their minds) a ‘gusher’, at least not yet. If Zion had what they believed conclusively to be a ‘major discovery’, they would have announced it to the world the day it happened. They’re more eager for a ‘major discovery’ than any of us, when it happens they’ll be the first to tell us. Whatever Zion has ‘discovered’ at the bottom of the Ma’anit-Rehoboth #2 is positive enough to warrant plans to isolate the three open hole zones below 15,830 feet.
The company has released the completion rig that was set up at the Ma’anit-Rehoboth #2 site and they don’t plan to resume testing until after March 2010. Three possible explanations come to mind; either the current rig is incapable of the next planned phase of completion testing (casing the ‘open hole’ beyond the deepest ‘zone of interest’, for example), or it had an appointment elsewhere, or “evaluating the next steps” is going to take more than three months. I don’t know the answer, but only one of those explanations seem plausible to me.
That’s enough speculation for one week; lets get back to two things we know. Last month Zion hadn’t discovered even a drop of oil; this month we know they’ve produced at least a quart. That’s something. The second thing we know is something Richard Rinberg reminded us of in his October 30 newsletter, “The end of the matter is better than its beginning, and patience is better than pride” (Ecc. 7:8)
Related posts:
- Drilling Complete on Ma’anit-Rehoboth #2
- Zion Oil Begins ‘Completion Testing’ of Ma’anit Rehoboth #2
- Zion Logs the Ma’anit Rehoboth #2
Gifts of the Magi
December 18, 2009
By O. Henry One dollar and eighty-seven cents. That was all. And sixty cents of it was in pennies. Pennies saved one and two at a time by bulldozing the grocer and the vegetable man and the butcher until one’s cheeks burned with the silent imputation of parsimony that such close dealing implied. Three times Della [...]Yossi Langotsky, Israel’s Unlucky Oil Man
December 11, 2009
On November 30 the Wall Street Journal printed the story of Yossi Langotsky, an Israeli who has been searching for oil in the Promised Land for fifty years. The WSJ story focuses on Yossi’s involvement in Israel’s recent off-shore gas discovery and how he was left behind in its reward.
I met Yossi almost five years ago and learned about his role in the search for Israel’s oil. It was early April, 2005; Elaine and I had been invited to the Zion Oil & Gas ‘Ma’anit #1′ spudding (beginning drilling operations) ceremony; the company’s first oil well drilling project in Northern Israel. Before the ceremony we were introduced to Mr. Langotsky, and then aside, we learned the unfortunate story of Yossi’s relationship to the Ma’anit #1. The hole in which Zion Oil was to begin drilling in the spring of 2005 was, at that time, already 7,661 feet deep. This spudding ceremony wasn’t the first for the Ma’anit #1; in 1995 and Yossi headed the first drilling of the Ma’anit #1, but at 7,661 feet the project had run out of money and the hole was abandoned. Zion Oil & Gas reopened the Ma’anit #1 in 2005, drilled to 15,500 feet and then abandoned the well due to mechanical problems. Earlier this year, Zion re-opened the Ma’anit #1, now dubbed the ‘Ma’anit-Rehoboth #2′ and drilled directionally to a total depth of 17,913 feet.
Today seven zones of the Ma’anit-Rehoboth #2 are being tested for hydrocarbon (oil and gas) potential. According to Zion CEO Richard Rinberg, in his October 30 newsletter, “With regard to our log analysis, an independent log analyst noted that the Ma’anit-Rehoboth #2 well does have a specified amount of potential ‘net pay’.” Although he was quick to warn readers, “You will appreciate that, until such time as we recover hydrocarbons at the surface (or not), we are not able to give any estimates of what (if anything) we believe we may recover.”
At this point, whether or not the Ma’anit-Rehoboth #2 becomes a productive well, no one knows. Whatever happens, Yossi Langotski, the man who chose the location and drilled the first 7,661 feet, once again, will have his share of the bragging rights but not the profits. Below is the WSJ story.
For One Man, Israel’s Big Gas Find Is Bittersweet Victory
By CHARLES LEVINSON
HERZLIYA, Israel — Two natural-gas fields in Israel’s Mediterranean waters were found in January to contain enough resources to meet Israel’s energy needs for 20 years — a huge find after more than half a century of lackluster carbon exploration here.
But for Yossi Langotsky, who for 10 years has been the driving force behind the project, the gusher was a bittersweet victory. He has been drilling holes in the Promised Land for nearly four decades, in a mostly futile search for energy. A month before drilling started on what would become the largest find in Israeli history, his financial backer pulled out. That forced him to relinquish his stake — today valued at an estimated $350 million.
“After 60 years of no success in oil exploration here in Israel, a miracle took place, and I lost out 30 days before it happened,” says Mr. Langotsky, 75 years old.
The pivotal role played by Mr. Langotsky in the historic discovery is undisputed. The two fields are named for his daughter, Dalit, and granddaughter, Tamar.
The fields, which won’t start producing gas until 2014, are relatively modest by Mideast standards. But they have already triggered a frenzy in the country’s quiet energy industry.
Photo by: Debbie Hill for the Wall Street JournalYossi Langotsky was forced to relinquish his stake in a natural-gas project shortly before drilling started on the largest find in Israeli history.
Since January, Israeli oil companies’ stocks have soared, some rising as much as tenfold. In 2009, oil companies have invested between five and 10 times as much in Israel exploration as at any point in the country’s history, says Yaakov Mimron, head of Israel’s Petroleum Commission.
In recent weeks, two international companies, including Houston-based Noble Energy Inc., which led the team that made the gas find in January, separately began extensive and costly 3D seismic surveys of more offshore prospects. A Noble spokesman said they expect to drill new wells next year.
In the past 60 years, oil companies have drilled about 450 wells, but choked out just 20 million barrels of oil, less than Saudi Arabia churns out in three days.
Israel’s dearth of oil in a region awash in it became a national joke. “My closest friends laughed at me,” says Mr. Langotsky.
Many Israeli oil geologists quit the profession. Many of those who stayed are a touch unconventional by industry standards. The two exploration companies currently drilling for oil onshore in Israel are both run by pious prospectors, one an Orthodox Israeli Jew and the other a born-again evangelical Christian from Texas. They both use a combination of biblical prophecy and sound geological data to decide where to drill.
Mr. Langotsky began his oil career as a graduate student in the late 1950s, studying oil prospects along the Dead Sea. He left the profession when he was called on to serve in the army. He played a prominent role commanding an elite reconnaissance unit that helped capture Jerusalem from the Jordanians in the 1967 war.
After leaving the army in 1979, Mr. Langotsky returned to the oil business. For most of the next two decades he roamed Israel, drilling as many as 60 wells.
In the 1990s, Mr. Langotsky and a handful of others began looking offshore. Israel’s fortunes started to turn with a series of moderate-size gas finds in waters off the coast of southern Israel and Gaza.
It was then that Mr. Langotsky first turned his attention to a vast tract of territory deep underwater in the Mediterranean Sea, farther offshore than others were looking.
He pitched the prospect to about 100 top international oil firms, he says. They all turned him down, except for Britain’s BG Group PLC, which agreed to form a partnership with Israeli companies to study the site. The site was set to drill in 2002, but then the project snagged.
Drilling costs in such deep waters nearly 60 miles offshore would likely reach hundreds of millions of dollars, and the partner firms started squabbling about who would shoulder what percentage of the risk. There were also technical problems. Many international oil companies were wary of working in Israel, for fear of alienating oil-rich Arab governments.
Companies started dropping out, including, in 2005, BG itself. The company said the project wasn’t one of its drilling priorities at the time. Eleven different companies were in and out of the project at various times in the nine years it took to start drilling.
At last, in 2007, Noble, a midsize Texan oil company, agreed to buy a 35% stake and take over operations.
Since the project’s conception in 1999, Mr. Langotsky remained its public face. He convinced new firms and investors to join whenever one dropped out, and lobbied the Israeli government.
“If Yossi had not been there, then things would be looking quite different today,” says Charlie Druckman, Israel’s petroleum commissioner until 2004.
Early in the project, BG offered Mr. Langotsky the chance to buy a 5% stake. Unable to finance the stake himself, he brought in Israeli billionaire diamond and real-estate magnate Benny Steinmetz, who agreed in 1999 to buy the stake and give Mr. Langotsky one-fifth of his share, Mr. Langotsky said.
But in the summer of 2008, amid the global financial crisis, another infusion of cash was needed to start drilling, and Mr. Steinmetz balked, according to Mr. Langotsky. He said he would no longer invest in the project, relinquishing his 5% stake — including the share pledged to Mr. Langotsky, according to Mr. Langotsky. Other investors in the project took over the stake.
Mr. Langotsky still had the option to buy a 5% stake, but couldn’t find an investor to back him. Soon after, Noble announced the big find at Tamar, followed by the smaller Dalit field — finds amounting to nearly 1.2 billion barrels of oil equivalent. Mr. Langotsky was left with nothing but bragging rights.
Mr. Langotsky has captured some sympathy from industry colleagues and in the Israeli media. In the Israeli media’s portrayal of the situation, Mr. Steinmetz has been vilified. In September, Israel’s leading economic newspaper named him most in need of forgiveness for Yom Kippur, the Jewish day of atonement, for leaving Mr. Langotsky in the cold.
Supporters of Mr. Steinmetz say it didn’t make sense to continue with a risky, capital-intensive oil venture at a time of global economic uncertainty.
Mr. Langotsky remains defiantly upbeat. The son of early Zionist pioneers who valued duty to country over self, he insists his passionate search for oil was never about the money. “I’m very proud; I feel great,” he says. “I am totally disappointed that I failed to keep my rights, but this discovery is one of the greatest achievements of my life.”
Write to Charles Levinson at charles.levinson@wsj.com
Related posts:
- Does Israel Have Oil? Wrong Question.
- Canada’s Bontan moves into Israel
- Israel Discovers Natural Gas: Is Oil far Behind?
Zion Oil Oversells Stock Offering by $19 Million
December 5, 2009
The total available subscription of 3.6 million shares, for gross proceeds of $18 million, will be accepted by Zion and amounts for the unfilled oversubscriptions will be refunded as soon as possible. As detailed in the prospectus, oversubscription rights will be allocated pro rata in accordance with the number of basic subscriptions rights exercised.
Zion’s Chief Executive Officer, Richard Rinberg, said today, “I am pleased to announce the successful conclusion of our rights offering. The significant oversubscription is very gratifying and shows the high level of interest in our oil and gas exploration work in Israel. The $18 Million proceeds will provide us with financial and operating flexibility and will enable us to significantly further our exploration and drilling program.”
Under the completed rights offering, holders of record of Zion’s common stock, as of the close of business on October 19, 2009, were given non-transferable subscription rights to purchase up to 3.6 million shares of common stock at a subscription price of $5.00 per share.
Zion is currently drilling its Elijah #3 well and drilling has reached a depth of approximately 5,250 feet (1,600 meters). Next week, Zion plans to carry out completion testing on its Ma’anit-Rehoboth #2 well that was drilled to a depth of 17,913 feet (5,460 meters).
For updates on the drilling activity please visit Zion’s website “www.zionoil.com“.
Related posts:
- Zion Oil Rights Offering Declared Effective
- Zion Oil Files for New Rights Offering
- Zion Oil Announces Rights Offering
Wall Street Journal Interviews John Brown
December 5, 2009
The Wall Street Journal recently interviewed Zion Oil & Gas Founder John Brown in Israel and produced a short video for their viewers. John Brown speaks of his faith and the search for Israel’s oil. To view the Wall Street Journal video, just click on the play button below.
Related posts:
- John Brown Interviewed on Fox Business
- Interview Between Pastor John Hagee & John Brown
- Zion Oil Founder John Brown on Jewish Voice TV
Explaining Heaven to Bears
December 1, 2009
“The man without the Spirit does not accept the things that come from the Spirit of God, for they are foolishness to him, and he cannot understand them, because they are spiritually discerned.” (1 Corinthians 2:14) At True Potential Publishing, we’ve been checking into making all of our printed books available in e-book format as well. [...]-
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