Eilat ConferenceMay 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 12-14-10

• Existing Pipeline• Planned Pipeline

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2004 2005 2006 2007 2008 2009 2010

• IEC Natural Gas Consumption, BCMA

• Power plant conversions

Mari–B Field

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FARMOUT AGREEMENTS

• Who are my new Partners?

Reputation/FCPA

Financial Capabilities

Strategic relationships (AMI’s, Marketing)

Professional compatibility

Operatorship

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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?

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Theoretical Timeline

January February March April May June

Diligence

FOA Negotiations

Seek Board Approval

Seek Gov’t Approvals

Transaction Closing

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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)

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Governing Law/Dispute Resolution

• Usually non-Israeli law

• Expert Determination/Arbitration

• LCIA/ICC

• 1/3 Arbitrators

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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.)

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