BLP Oil & Gas Update Creative Doc.pdf Mar. 2014 | Page 2

“As Israel’s oil and gas market evolves, we may
see that royalty interests will become a thing of the past...”
The problem Israel is facing is that, in the current climate, IOCs looking to
farm-in to exploration or producing assets may struggle to come to terms with
the sometimes extensive royalty situation their lawyers will discover during the
due diligence exercise. These may raise anti-bribery and corruption concerns,
as well as commercial and legal difficulties. The royalty situation may also
present a legal challenge for international banks asked to provide financing
for the development of any discovered fields. The tricky question of creditors
order of priority will need to be resolved to the satisfaction of its credit
committee before the investment.

As Israel’s oil and gas market evolves, we may see that royalty interests will
become a thing of the past as acquirers buy out the royalty holders as part of
the transaction to acquire the licence, and as licences are sold at higher
valuations for cash, reducing the need to pay in part with royalty interests.
Such was the case in the evolution of a number of jurisdictions.

About BLP Law
Whilst demand for energy and natural resources continues to grow, creating
great opportunity for the sector, a range of economic, political, commercial
and physical or technological issues create sources of risk that require
successful resolution. BLP can help you provide practical legal solutions.