Eilat Conference
May 27, 2013
FARMOUT AGREEMENTS OF PETROLEUM RIGHTS IN ISRAEL
Noble in the Eastern Mediterranean
 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
Mari–B Field
•IEC Natural Gas Consumption, BCMA
6
•New 12-14-10
5
4
•Power plant conversions
3
2
1
0
2004
2005
2006
2007
2008
2009
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
2010
•
•
Existing Pipeline
Planned Pipeline
FARMOUT AGREEMENTS
• Who are my new Partners?
 Reputation/FCPA
 Financial Capabilities
 Strategic relationships (AMI’s, Marketing)
 Professional compatibility
 Operatorship
4
•4
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
•5
Theoretical Timeline
January
February
March
April
May
June
Diligence
FOA
Negotiations
Seek Board
Approval
Seek Gov’t
Approvals
Transaction
Closing
6
•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