Eran Azran and TheMarker Staff
Genie Energy, an American company that is drilling for gas on the Golan Heights, said yesterday it had found “significant quantities of oil and gas,” confirming remarks made by its chief geologist two days earlier.
“Preliminary evidence from the exploratory wells drilled by its Afek subsidiary in Northern Israel confirms the existence of significant quantities of oil and gas within its exploratory license area,” Genie said in a statement, but added that it does not yet have sufficient evidence to determine whether this or any part of the resource can be “technically or economically produced.”
Shares of Genie, which said the petroleum was found in multiple strata in some cases up to 350 meters thick, shot up 19.9% to $11.28 in New York on the news.
The details were in line with what Yuval Bartov, chief geologist for Genie’s Israeli subsidiary, Afek Oil & Gas, told Israel Channel 2 television news on Tuesday, when he indicated the find could be quite substantial. “On average worldwide strata are 20-30 meters thick, and this is 10 times as large as that, so we are talking about significant quantities,” he said.
“We remain optimistic given the results to date,” said Howard Jonas, the Jewish-American millionaire who is Genie’s CEO and chairman. “In term of quantity, our log results indicate that this could be a significant find if analogous conditions are present over a significant portion of the license area.”
Afek has completed drilling two exploratory wells within the license area and has begun drilling a third, with seven more to go. The find apparently came from Ness 5, the first of the drillings.
Afek won a license two years ago to explore for gas and oil in the southern Golan Heights in an area designated “Ness.”
The company, with paid-up capital of $75 million, drew up a detailed drilling program, hired geologists as well as Efi Eitam, the reserve general, rightist politician and former national infrastructure minster as chairman. Apart from Jonas, Genie’s shareholders include the media magnate Rupert Murdoch and Lord Jacob Rothschild.
Unlike other tiny energy firms operating in Israel, like Givot Olam and Shemen, Afek isn’t publicly traded. Bartov’s remarks elicited skepticism because Genie, which does trade in New York and is required to make current disclosures to investors, issued on confirmation for two days.
In any case, energy experts said they remain skeptical about Afek’s commercial prospects.
“There’s a significant difference between ‘a barrel on paper’ and a barrel you can extract,” said one who spoke on condition of anonymity and recalled the case of Givot Olam’s early reports on findings at a drilling near the central Israeli town of Rosh Ha’ayin.
“Givot Olam started talking in terms of quantity of oil and later switched to them about barrels that can actually be extracted. In the end, Givot spoke in its financial reports ... it was clear that it would extract from all its oil reserves just 3%-4%,” the source said, adding: “I would tell investors in Israel or New York to treat this cautiously and with suspicion.”
Another industry source noted that preliminary reports talked about the ability to extract 30% of the oil in the reservoir. “But it would be a lot lower,” he said. “We still don’t know the cost of extracting the oil, which is critical given the decline in the [global] price of oil.”
Oil exploration is likely to encounter legal problems as the Golan is regarded as occupied Syrian territory. But Eitam told TheMarker last month that he wasn’t concerned.
“We are operating through the power of attorney of the state, which has had control of the Golan for more than 40 years,” said Eitam. “Syria right now is at war.”