Genie Energy, the U.S. company exploring for oil and gas in the Golan Heights, saw its shares jump 67% in the three weeks after Yuval Bartov, the chief geologist of its Israeli unit, told Channel 2 about signs of significant reserves at its Ness 5 site.
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The U.S. Securities and Exchange Commission intervened and the company put out a formal statement two days later, more or less confirming Bartov’s remarks. Now, nearly a month later, Genie’s shares have pulled back, although they are still 30% up from where they were a month ago, and Bartov remains optimistic, if somewhat more cautious than he was earlier.
“The exact numbers are still being studies and we still need to go through the production stage, to test and study sub-surface fluid properties. The amounts are very significant,” Bartov told TheMarker. “If we can produce it economically, it will be of great significance for Israel.”
Genie is backed by the by the U.S. millionaire Howard Jonas; shareholders include the media magnate Rupert Murdoch and Lord Jacob Rothschild. Its Afek Oil & Gas unit, which is headed by Effie Eitam, an ex-general and national infrastructure minster, is conducting exploratory drilling program of up to 10 wells under a three-year exploration license granted by Israel’s Energy and Water Ministry in 2013.
“Right now we're at a depth of 1,070 meters, just above our target stratum,” Bartov said. “I hope that next week we will be able to enter it and see what the situation is there.”
Bartov said Genie chose the Golan for its special geology, which is the product of ancient volcanic activity that heated the organic material that had accumulated underground over millions of years to turn it into petroleum. “That’s a unique occurrence both in Israel and even the world,” he said.
Although significant quantities of natural gas have been found off of Israel’s Mediterranean coast over the last decade, prospecting for oil on land has yielded some 500 dry wells. But Bartov asserts that Genie’s program is different from previous efforts.
“We are using a completely different geological concept from those done offshore or the 500 dry wells on land Our idea is to find the rock stratum where the oil itself was produced. We believe that if the geological properties of underground heat are true, we will find oil. In our first two drillings we found that these properties do exist. Our geological models have been confirmed. We found what we expected: Liquid petroleum underground.”
Genie’s New York Stock Exchange-traded share price shot up from $8.11 when Bartov gave his television interview to a high of $13.52 a week ago. Yesterday at it was down 3.9% at $11.50 late morning local time.
Bartov said Israelis should not be expecting a traditional gusher from Ness 5 or its sister wells, even if there are major quantities of oil. Conditions like that, where the pressure is immense, are rare. It doesn’t exist at the strata Genie is working, and the oil will have to flow into the well, from where it will be pumped up to the surface.
Apart from the question of the Golan reserves' size and commercial viability, Genie faces another obstacle from environmentalists.
“The southern Golan is filled with agricultural settlements,” said Yair Dorai, a resident of Rosh Pina and an activists working against energy exploration in the area. “You can’t build a petrochemical industry, with hundreds of drillings, without hurting the environment, settlements, water and tourism."
Orly Ariav, who is with the environmental group Adam Teva V’Din, faults the government for not having a comprehensive and consistent policy on exploration. Energy companies control the situation and are unconcerned with the wider impact of their operations, she said. Like other activists, she is especially worried about the Golan’s water, which flows downstream to the Kinneret.
Maya German, vice president for communications and regulation at Afek, said the company is meeting environmental standards and operating with complete government supervision. “We’ve completed two drillings successfully without noise, pollution or harming any water,” she said, noting that drilling technology had advanced a lot in recent years.
“If you once needed a large area to extract big quantities of oil, today you can do it with a lot less. We believe that to extract oil in the Golan we will need only a small number of drilling sites,” she said.