Shemen Oil & Gas Resources reported on Sunday it had found “significant” indications of oil at its Yam 3 well, off the coast of Ashdod.
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The company said that initial seismic surveys indicated a potential of 227 million barrels of “very high quality” oil, with 40% of it likely to be commercially recoverable, as well as about three trillion cubic feet of natural gas, with an estimated 35% recoverable.
“Data received from the operator were examined by logging decipherers and a very experienced geologist in the field of oil and gas exploration hired by the license partners to supervise and consult on the project,” Shemen’s statement said. “[But] signs of oil do not attest to a ‘discovery’ in the sense used under Petroleum Resources Management System rules or ‘discovery’ in the meaning set out by the Israel Petroleum Law – 1952,” the statement added.
Shares of Shemen, which owns 78% of the license, rose as much as 28% in Tel Aviv Stock Exchange trading on Sunday to NIS 1.35 before settling for a close of NIS 1.71, a gain of 11.6% for the day.
“Shemen’s announcement is a positive milestone, but there remains a wide range of scenarios,” said Yaron Zar, energy analyst at Clal Finance, said in response to the news, which he said was more specific than earlier reports about the find from the company. He said “Shemen shares have significant potential but also carry a high level of risk.”
Shemen, whose license area is located in shallow waters 16 kilometers offshore opposite the city of Ashdod, said it would perform production tests at the site to determine how much oil can be exploited commercially. The oil was found within a layer measuring 68 meters in thickness was reported to be of high quality.
Shemen said the tests establishing the presence of oil included logging while drilling as well as open-hole wireline logging performed when drilling reached a depth of 5,700 meters.
Shemen and its partners, which include Caspian Drilling Company, said in December there may be as much as 120 million barrels of crude oil and 1.8 trillion cubic feet of gas potential. The U.S. Geological Survey estimates the Eastern Mediterranean’s Levant basin, nearly half of which is in Israeli waters, may hold 1.7 billion barrels of recoverable oil.
An energy industry source, who spoke on condition of anonymity, said the ability to exploit the oil hinged on the geological structure. “It was clear that there is oil in the license based on work done there in the 1990s,” he said. “The big question is there is something in the style of Givot Olam or something better.”
Givot Olam’s onshore well near the town of Rosh Ha’ayin ended up yielding far less commercially recoverable oil than the company had initially expected because the rock was not of the kind that yielded much petroleum.