IO Monthly Update - October 2013

Israel Opportunity Updates

   Antitrust Commisioner approves transfer of participation rights in 'Oz' license to Israel Opportunity
        Antitrust Commissioner Prof. David Gilo has granted an exemption from the restrictive covenant to transfer 10% of the participation
        rights of Frendum Investment Limited in 'Oz' license to Israel Opportunity Energy Resources Limited Partnership.

   Petroleum Council recommends approving request submitted by 'Pelagic' Partners
        The Petroleum Council recommended approving the request submitted by the 'Pelagic' partners on September 1st to change the
        boundaries of the licenses Editya/371, Lela/372, Yahav/373 and Yoad/374, by redefining the boundaries of the licenses to reflect
        the geological structures in the area. According to the request, once the boundaries have been changed, three of the four licenses
        will be returned to the government and Yoad/374 license will be extended in two years.

Regulatory Developments 
  Israeli High Court of Justice dismisses petition against the government's decision to allow the export of up to 40%
      The Israeli High Court of Justice has dismissed the petition against the government's decision to allow the export of up to 40% of
      Israel's natural gas reserves. The petitioners asked the court to order the government to move the issue of gas exports to the
      Knesset legislation, arguing that the government has no authority to make a decision on the matter. This means a green light
      to export natural gas according to the government's decision reached in June 2013. The government decided to retain 60% of
      Israel natural gas reserves for domestic use. This means that the government will hold back 540 billion cubic meters (BCM) of
      Israel's estimated 900 BCM of gas reserves.

Industry Major Events

  Globe Exploration announces substantial signs of hydrocarbons at Ofek 2 well
      Globe Exploration LP reported the detection of substantial signs of hydrocarbons in the Ofek 2 well. The exploration well reached
      the target strata at a depth of 6,460 meters and verification logs have been conducted, leading to the conclusions that the net
      thickness of the hydrocarbon-bearing strata is 50 meters with signs of hydrocarbons including natural gas and condensate.

  An updated resources report at 'Gulliver' license reveals two natural gas fields, with a 25% chance of success (Best estimate)
      The partners of Gulliver/396 license reported that according to the independent prospective resources report conducted by
      Equipoise Solutions Ltd. there are two prospects of natural gas fields within the license territory with a best estimate of 100,700
      million cubic feet and 25% chance of success. Gulliver license is located only 3 kilometers offshore Israel with a total depth of up    
      to 1000 meters.
  Caspian Drilling Company informs partners at 'Yam 3' that the exploration well found to be a dry hole
      Despite the finding of oil signs in the preliminary tests conducted last month, Shemen Oil and Gas Resources Ltd. and its
      partners have abandoned the Yam 3 well, located offshore Ashdod after the announcement it was made that the well was found
      as a dry hole. The Yam 3 well reached a depth of 5,700 meters, including water depth, and cost $170 million. Following the
      disappointing results Shemen's Chairman, Gabi Ashkenazi resigned.

  The partners of 'Gabriella', 'Yitzhak' and 'Yam Hadera' licenses receiven extension from the Ministery of Energy and Water
      An announcement was made that the partners of Gabriella/378, Yitzhak/380 and Yam Hadera/383 licenses, located offshore of
      Israel, received an extension for the work programs from the Ministry of Energy and Water Resources. The extended work program
      for the Yitzhak license requires the partners to execute a drilling contract by September 30, 2014. The Yitzhak license has been
      extended to October 15, 2014. The extended work program for the Gabriella and 'Yam Hadera' licenses requires the partners to
      submit a request to the Ministry for the approval of a new operator that complies with Ministry regulations by February 28, 2014,
      to execute a drilling contract 
by April 30, 2014, and to spud a well by August 31, 2014. The Gabriella license has been extended to
      September 1, 2014.

Regional Discussions

 Growing interest in Israeli gas reserves
      Since the Israeli High Court of Justice dismissed the petition against the government's decision to allow the export and gave a
      green light to the government to begin exporting resources, announcements from neighboring countries regarding the Israeli
      gas reserves have been reported.
           •  The Energy Minister of Turkey announced that Turkey is interested in the Israeli natural gas reserves.
           •  The Cypriot government is seeking to export quarter of the natural gas resources from 'Leviathan' field through its future
               LNG facility, expected to be build in Vassilikos. After three years of negotiations, Cyprus and Israel are expected to sign
               the Unitization agreement within the next 6 months.
           • Globes reports that representatives from Woodside are expected to arrive soon to Israel in order to promote the deal to
            acquire 30% of Leviathan.