Report estimates Royee gas prospect at 3.2 TCF

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If it materializes, this makes Royee, owned by Ratio, Israel Opportunity and Edison, Israel's third largest gas reserve.

This morning, Ratio Oil Exploration (1992) LP (TASE:RATI.L) and Israel Opportunity released the resources report by US company NSAI on the Royee prospect in the Neta and Royee licenses, in which Ratio holds 70%, Israel Opportunity 10%, and Edison 20%.

NSAI gives a best estimate of 3.2 trillion cubic feet (TCF) of gas in the prospect, with a low estimate of 1.9 TCF and a high estimate of 5 TCF. If the drilling does indeed discover gas at these volumes, Royee and Neta will become the third largest natural gas reserve in Israeli waters, after Leviathan, at 21.9 TCF, and Tamar, at 11 TCF, and the fourth largest in the Levant basin.

The figures in the resources report are based on a three-dimensional seismic survey carried out in early 2010 over an area of 505 square kilometers.

It should be pointed out that discovering gas does not necessarily mean that it is commercially worthwhile to produce it, since this depends, among other things, on the amount of gas that can be sold in the Israeli economy and its price, and the amount that can be exported.

It is not certain that there is sufficient demand in the local economy to justify developing the Royee reserve, since the Tamar reserve has many long-term contracts with Israeli firms such as Israel Electric Corporation, the private power producers, and other large consumers. As far as exports are concerned, these will command a higher price, but will also require higher investment in development and infrastructure.

Israel Opportunity CEO Eyal Shuker said this morning in response to the NSAI report, "I feel great satisfaction at the results and at the fact that our strategy of spreading assets and risk has proved itself. Israel Opportunity today is a partner not just in a range of licenses, but also in a range of prospects.

"This is also good news and highly significant at the national level. We have learned that the Levant basin contains in its depths many more reservoirs, and I hope that the next Israeli government will understand the opportunity and encourage entrepreneurs to continue their exploration and development activity for the sake of a promising future."

Published by Globes [online], Israel business news - www.globes-online.com - on December 14, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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