Oil Refineries Entered Into a Contractual Agreement With the Tamar Partnership for the Purchase of Natural Gas

HAIFA, Israel, November 27, 2012 /PRNewswire/ --

Oil Refineries Ltd. (TASE: ORL.TA) (hereinafter "the Company,""ORL"), Israel's largest integrated refining and petrochemical group, announced that on November 25, 2012 it entered into a contractual agreement ("the Agreement") with the Tamar Partnership (Noble Energy Mediterranean Ltd., Isramco Negev 2 LP, Avner Oil Exploration LP, Delek Drilling LP, Dor Gas Exploration LP) for the purchase of natural gas, which will serve as an energy source and raw material for the Oil Refineries and its subsidiaries: Carmel Olefins Ltd, Gadiv Petrochemical Industries Ltd and Haifa Basic Oils Ltd.

According to the main points of the Agreement:

• The overall amount of gas the Company expects to purchase from the Tamar Partnership is about 5.8 BCM.
• The Agreement period is for up to seven years or until the Company uses the overall annual amount of gas in the Agreement, whichever is earlier. This is subject to the Company's right to extend the Agreement by a period of up to two years, if by the end of the sixth year of the Agreement the Company will not, in practice, have received the pro-rata amount of the quantity stipulated above.
• The supply of gas shall commence at the date that the Tamar Partnership shall start to operate the field it owns.
• The overall monetary value of the Agreement is likely to reach about USD 1.3 billion.  The actual scope will be affected by all the terms and mainly the oil price and the scale and rate of gas consumption.
• The price of gas will be fixed according to a formula that is mainly based on the price of oil (including "floor" and "ceiling" prices), and to a smaller degree, by the price of the production component in the price of electricity (with an "adjustable floor" price).
• In the interim period that begins when the terms stipulated in the Agreement have been fulfilled and until completion of the project (to the extent that it will be completed) to increase the supply capacity of the treatment and transport system of the Tamar project, the supply of gas to the Company shall be subject to the amounts of natural gas available at that time, after supply of gas in accordance with agreements with the Tethys Sea Partnership (Noble Energy Mediterranean Ltd., Avner Oil Exploration LP, Delek Drilling LP, Delek Investments & Properties Ltd) including the agreement the Company signed with the Tethys Sea Partnership ("Tethys Sea Agreement"), and in accordance with agreements signed with the Tamar Partnership prior to the Agreement with the Company.

The Agreement includes additional agreements usual in agreements of this type, including: Undertaking of the Company to take or pay for the minimum annual amount of gas in an amount and in accordance with the arrangements stipulated in the Agreement, compensation mechanisms for short deliveries, quality of the gas, liability limitations, arbitration mechanism and others.

At the same time, pursuant to discussions between the parties, on November 25, 2012 a compromise agreement was signed between the Tethys Sea Partnership and the Company, whereby the parties agreed as follows ("the Compromise Agreement").

In the Compromise Agreement the Company confirmed that it does not disagree with the argument by the Tethys Sea Partnership that the reduction in supply from January 2012 was due to force majeure.

From August 2012 the Company shall only pay for gas actually supplied and not in accordance with the monthly payments stipulated in the Tethys Sea Agreement.

The amount of up to USD 34 million out of an amount of USD 59 million that the Company paid to the Tethys Sea Partnership on account of gas not yet delivered ("the Accumulated Amount") shall be set off against amounts to which the Tethys Sea Partnership is entitled for gas supplied to the Company from August 2012 until the start of the flow of gas from the Tamar project.  The balance of the Accumulated Amount, in the sum of USD 25 million, shall be used as payment for gas the Company consumes from the date gas flows from Tamar until the end of the Tethys Sea Agreement.  The sellers shall not be obliged to sell to the Company and the Company shall not be obliged to purchase gas beyond the stated amount of USD 25 million.  From the date of the flow of gas from the Tamar project, the Company shall pay the quantities it consumes under the Tethys Sea Agreement at the price stipulated in the Agreement. The period of the Tethys Sea Agreement shall be extended to the end of 2016 or until the date the Company consumes the complete quantity of gas stipulated in the said Agreement, whichever is earlier.

The Agreement requires the approval of the Anti-Trust Commissioner.

What is stated above concerning the expected start date for the supply of natural gas from the Tamar Partnership as well as the amount supplied to the Group in the interim period, from the Tamar Partnership and the Tethys Sea Partnership, are forecasts based, inter alia, on estimates of the Tamar Partnership of the date of operation of their gas field (in all matters related to the supply start date), the total natural gas consumption by the various consumers in Israel and other factors (in all matters related to the amount of supply in the period of shortage). Accordingly, there can be no certainty as to the date of the start of gas supply under the Agreement, and to the amount of supply to the Company, if and when there shall be a shortage period in its meaning in the Agreement.

The above is a convenience translation of the Hebrew announcement.  Only the Hebrew announcement filed with the Israeli Securities Authority and the Tel-Aviv Stock Exchange will bind the company.

About Oil Refineries Ltd.

Oil Refineries Ltd. (ORL), located in the bay area of the city of Haifa, operates Israel's largest integrated refining and petrochemical group. It is one of the leading refineries in the Eastern Mediterranean area and integrates, on-site, petrochemical businesses. ORL runs sophisticated and state-of-the-art industrial facilities with a refining capacity of 9.8 million tons of crude oil per year and a Nelson Complexity Index of 7.4, providing a variety of quality products used in industrial operation, transportation, private consumption, agriculture and infrastructure. Besides production of fuels, the company produces in its wholly owned subsidiaries Polymers (through Carmel Olefins Ltd), Aromatics (through Gadiv Petrochemical Industries Ltd), and Lube-Oils (through Haifa Basic Oils Ltd). The Company's shares are listed on the Tel Aviv Stock Exchange under the ticker ORL. For additional information please visit http://www.orl.co.il.

ORL is controlled by the Israel Corporation Ltd. and Israel Petrochemical Enterprises Ltd., both public companies whose shares are traded on the Tel Aviv Stock Exchange.

The above noted in this release may include forward-looking statements based on Company data, as well as Company plans and estimations based on this data. The activity, results and other data may be substantially different in reality given uncertainty and various risks, including those discussed under risk factors in the Company's financial statements and Director's report

Company Contact:
Rony Solonicof
Chief Economist and Head of Investor Relations
Tel. +972-4-878-8152
Contact [email protected]

Investor Relations Contact:
Ehud Helft / Porat Saar
CCG Israel
Tel. (US) +1-646-233-2161 / (Int.) +972-52-776-3687
[email protected]

SOURCE Oil Refineries Ltd