Gulf Oil and Gas accountACCOUNT

Leviathan Reservoir – Grant of Leases

Source: www.gulfoilandgas.com 3/30/2014, Location: Middle East

Delek Group, an immediate report that was published by the Company’s gas subsidiaries - Delek Drilling Limited Partnership and Avner Oil Exploration Limited Partnership (together "the Partnerships") is included below, with regard to granting the Partnerships and the other partners in the 349/Rachel and 350/Amit Licenses, two title deeds in lieu of the Licenses - Lease I/14 Leviathan South and Lease I/15 “Leviathan North” (“the Leases”). The Leases cover the Leviathan natural gas field, with I/14 Leviathan South comprising part of the Rachel License and I/15 Leviathan North comprising part of the Amit License.

“Following on the Partnership’s immediate report of March 23, 2014 concerning extension of the 349/Rachel and 350/Amit licenses (“the Rachel License”, “the Amit License” and “the Licenses”, respectively), the Partnership hereby announces that on March 27, 2014, the Ministry of National Infrastructures, Energy and Water's Oil Commissioner ("the Ministry of Infrastructures" and "the Commissioner", respectively) granted the Partnership and the other partners in the Licenses, two title deeds in lieu of the Licenses - Lease I/14 Leviathan South and Lease I/15 “Leviathan North” (“the Leases”). The Leases cover the Leviathan natural gas field, with I/14 Leviathan South comprising part of the Rachel License and I/15 Leviathan North comprising part of the Amit License.

The conditions specified in the said Leases are identical in principle and include, inter alia, the following key conditions:
1.The lease-holders and their respective holdings in each of the Leases are as follows (“the Lease Holder”):
Noble Energy Mediterranean Ltd. (“Noble Energy”) 39.66%
Avner Oil Exploration Limited Partnership 22.67%
Delek Drilling Limited Partnership 22.67%
Ratio Oil Exploration (1992) Limited Partnership 15.0%

2.The operator, as of the Lease grant date, is Noble Energy.

3.The area of each of the Leases covers an area of 250,000,000 square meters.

4.The Lease is granted for a period of 30 years, from February 14, 2014, and through February 13, 2044, and is extendable as stipulated by the Oil Law, 1952 ("the Oil Law”).

5.Under the Lease, the lease-holder is required to submit to the Commissioner a copy of the development plan for the domestic market within 6 months from the Lease grant date.

6.The production system and the transportation system to an on-shore facility, a part of the plan, will be designed and constructed so as to meet production and transportation capacities that will enable supply of gas to the national gas pipeline at a volume of at least 1.4 million cubic meters per hour from both Leases together.

7.In the development plan, the lease-holder will include a detailed schedule for implementing the development plan for the domestic market production system, whereby commercial production and supply of natural gas to the gas pipelines will start 48 months from the Lease grant date, subject to the Commissioner's authority to postpone or update the schedule established in the development plan as aforesaid.

8.Export of natural gas from the Lease will be subject to written approval by the Commissioner, with approval from the Minister of Natural Infrastructures, Energy and Water (“the Export Approval”), according to the Israel Government decision on exports (Decision 422, dated June 23, 2013) (“the Government Decision"). It is noted, that actual exports will not be permitted unless the domestic market is provided a quantity of 540 BCM following completion of the development plan, as specified in the Government Decision. Exports will also not be permitted in a manner that undermines the lease-holder’s ability to provide natural gas from the Leviathan field to the national gas pipeline at a quantity of at least 1.05 cubic meters of gas per hour (from both Leases together). In any case, actual exports will not begin before supply to the distribution pipeline starts.

The aforesaid notwithstanding, the Commissioner may consider lowering the quantity that the lease-holder is required to supply from the Leviathan field to the national gas pipeline as aforesaid, if the Commissioner is convinced, inter alia, that another lease-holder who will receive title to the Lease after March 27, 2014, supplies or is expected to supply, in a reasonable timeframe, gas to the national gas pipelines.

9.In the event of a shortage in natural gas in Israel, the lease-holder will grant priority to the needs of the domestic market, over supply capacities that are not subject to sales commitments under a valid contract effective at such time. Quantities supplied as aforesaid to the domestic market will be considered part of the quantity earmarked for the domestic market under the Government Decision, and will not detract from the exportable quantity under the Export Approval, as may be granted.

10.The Commissioner may require the lease-holder, if he deems it necessary due to special circumstances, to add facilities and wells to the production system and transportation system built by the lease-holder, as well as an additional access point, in such a manner that will enable supply of gas quantities exceeding those specified above safely, reliably, and efficiently to consumers in Israel; such demand will only be made under special circumstances, while considering and balancing all relevant factors, including considerations of economic viability, and if the Commissioner finds that such addition is not economically viable to the lease-holder, only if he finds a solution to that issue. Should the Commissioner make such a demand, the lease-holder will prepare an addition to the development plan and submit it to the Commissioner for approval within such time as specified by the Commissioner in his demand.

11.In order to secure compliance with the Lease and the Approvals, to secure payments which the lease-holder is required to make by law to the State and as a pre-condition to granting the Lease, the lease-holder is required to provide an unconditional and irrevocable autonomous bank guarantee made out to the State of Israel ("the Guarantee").

The amount of the guarantee (in all, for both Leases together) will be USD 50 million until April 10 2014, and at such time as approval is given for operating the production system the Guarantee will be increased to a total amount of USD 75 million and will further increase to a total amount of USD 100 million upon the start of production for export purposes under an extension of the development plan, or on December 31, 2020 (the earlier of the two). The Guarantee shall remain in effect throughout the Lease term and will remain in effect after expiration of the Lease so long as the Commissioner has not announced that it is no longer necessary and subject to Section 57(c) to the Oil Law.

It is noted, that upon deposit of the Guarantee for the Leviathan North lease, the existing guarantee provided for the Leviathan 2 well will be returned.

12.The Leases include additional provisions, including as concerns the following matters: sales to the Israeli market and for export; development plan components (including objectives, criteria and schedules); security arrangements; maintenance and repairs; examinations, reports and supervision; services to other lease-holders; provisions for environmental protection, safety, restrictions on transfers or pledges of the Lease and of production system assets; liability, indemnification and insurance.

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