Energy Ministry Recommends Relocating Oil Refineries from Haifa to Negev
Israel's Ministry of Energy is recommending the relocation of the Bazan oil refineries from their current site in Haifa Bay to a new location in the Rotem Plain in the Negev desert, with an estimated cost of $5-6 billion. This recommendation comes despite a 2022 government decision to completely shut down Bazan by the end of the decade and rely on imported fuels stored in secure national sites. The new proposal is part of a strategic review conducted by BDO for the Ministry of Energy, influenced by the lessons learned from the October 7th war and concerns about the nation's fuel supply security during emergencies.
Earlier, Bazan's management had approached the National Economic Council, proposing a compensation package exceeding $5 billion for the relocation. The Ministry's new plan suggests state funding for the move, framing it as a "renewal and reconstruction" project that would avoid direct compensation payments to the company. According to Chen Herzog, chief economist at BDO, the new facilities could be operational by 2033, balancing Haifa's development needs with Israel's energy security.
Potential funding for the relocation could come from carbon taxes, projected to yield around $9 billion over the next two decades. The proposed "hybrid" refinery would not only process crude oil but also produce future fuels, including sustainable aviation fuel. The recommendation also includes expanding national fuel storage and transportation capabilities, and strengthening import infrastructure, arguing that sole reliance on imported refined products poses a significant risk to energy security, potentially exposing Israel to embargoes during future conflicts.
The National Emergency Management Authority (NEMA) supports maintaining domestic refining capabilities, stating that Israel cannot depend solely on imported fuel. NEMA's position, submitted in April, advises against closing Bazan until the new Rotem Plain refinery is established, to prevent critical disruption to the nation's energy function. Bazan's facilities have been targeted in past conflicts, intensifying the debate over its relocation, with proponents citing safety concerns near population centers and opponents emphasizing the need for reduced import dependency during prolonged warfare.
Given the upcoming general elections in 50 days, the feasibility of advancing these new plans is uncertain, likely deferring a decision to the next government. Professor Avi Simhon, head of the National Economic Council, declined to comment on the Ministry's recommendation. Bazan stated that recognizing the necessity of independent domestic refining is crucial for Israel's energy security and that the company will continue its vital role in ensuring national energy independence.
