Israel's Energy Ministry Proposes Relocating Haifa Refinery South
Israel's Ministry of Energy has released a strategic assessment recommending the relocation of the Bazan oil refinery's petrochemical operations from Haifa Bay to southern Israel, estimating the cost of establishing a new refinery at $5-6 billion. This proposal, prepared by the ministry's Fuel and Gas Administration with assistance from BDO, suggests a "renewal" of the Bazan facility rather than a complete abandonment of domestic refining capabilities.
The ministry's plan aims to address national security concerns highlighted by recent conflicts and global supply chain vulnerabilities. It argues that relying solely on imported refined products poses an unacceptable risk, emphasizing the strategic advantage of maintaining the capacity to import crude oil and refine it domestically. This would allow Israel to tailor its fuel mix to local needs and security requirements, even during global shortages.
The report contrasts the estimated $5-6 billion cost for a new southern refinery with the projected $9 billion in carbon taxes the state could collect. The ministry suggests these future tax revenues could fund the new infrastructure, rather than using state funds to compensate for the closure of existing refining capacity and losing local refining altogether. The proposed "hybrid" refinery would also be adaptable for future fuels like sustainable aviation fuel and biodiesel.
Beyond the refinery itself, the Ministry of Energy recommends bolstering national energy security by increasing emergency fuel reserves, expanding storage and transport infrastructure, enhancing LPG discharge capabilities, and establishing additional fuel entry points. These measures are intended to prevent disruptions to the national fuel supply chain from single points of failure, such as damage to a port or storage facility.
This development follows Bazan's recent submission of its own economic assessment, which estimated the cost of its relocation from Haifa Bay at over $5 billion, though the company later clarified this was not a formal compensation demand. The Ministry of Energy's report frames the relocation as a basis for future fuel market policy, but no final decisions have been made regarding the construction, ownership, or Bazan's role in a new facility.
