Energy Ministry Proposes Relocating Haifa Refineries to Negev for $6 Billion
The Ministry of Energy recommends relocating the Bazan oil refineries from Haifa Bay to Mishor Rotem in the Negev for $5-6 billion, citing critical energy security lessons from recent conflicts.
The Ministry of Energy is recommending the relocation of the oil refineries from Haifa Bay to Mishor Rotem in the Negev, at an estimated cost of $5 billion to $6 billion. This recommendation comes against the backdrop of a 2022 government decision to completely shut down the Bazan Group (Bazan) refineries by the end of the decade and transition the Israeli economy to imported fuels stored in secured sites across the country.
The new recommendation is part of a strategic study prepared for the Fuel and Gas Administration of the Ministry of Energy by the consulting firm BDO. The study incorporates lessons from the October 7 war—which began nearly three years ago—and addresses concerns regarding emergency fuel supply security.
Recently, Bazan's management approached the head of the National Economic Council, Prof. Avi Simhon, presenting a price tag of over $5 billion in compensation for evacuating the petrochemical industry from Haifa Bay. Under the newly proposed "evacuation-construction" model, the relocation of Bazan to the Negev would be funded by the state, eliminating the need to pay billions of dollars in taxpayer-funded compensation directly to the company.
Funding and Future Technology
Chen Herzog, Chief Economist at BDO, estimates that the new refining facilities in the south can be built by 2033. This timeline aligns the development needs of Haifa Bay and the removal of the petrochemical industry with the preservation of Israel's energy security. Herzog suggests that a potential funding source for the relocation is the carbon tax revenue, which is projected to bring in approximately $9 billion over the next two decades.
The proposed new refinery will be a "hybrid" facility, capable of refining crude oil as well as producing future alternative fuels, including Sustainable Aviation Fuel (SAF). The recommendation also includes expanding domestic fuel storage and transmission capacities, alongside strengthening import and unloading infrastructures.
National Security Concerns
The Ministry of Energy argues that relying solely on imported refined products would jeopardize national energy security, exposing the country to potential embargoes by fuel suppliers during future conflicts. This stance is supported by the National Emergency Authority (NEMA) of the Ministry of Defense, which stated:
"Israel must maintain domestic refining capabilities and cannot rely exclusively on the import of finished fuel products."
In a position paper submitted to the Ministry of Energy, NEMA warned that until the planned refinery in Mishor Rotem is established, no steps should be taken to close Bazan, to prevent a critical disruption to the state's energy continuity.
The vulnerability of the Haifa Bay facility was highlighted during conflicts with Iran, where the Bazan compound was targeted by ballistic missiles. In 2025, an attack resulted in the deaths of three workers and the destruction of an on-site power plant. Proponents of the relocation argue that the facility's proximity to large population centers poses an immediate danger, while opponents believe the prolonged conflict underscores the necessity of reducing import dependency.
However, the release of this study just 50 days before the general election casts doubt on the immediate feasibility of the plan, which will likely be deferred to the next government. Prof. Avi Simhon declined to comment on the recommendation.
Bazan stated in response:
"The recognition of the vital importance of local and independent refining capacity for Israel's energy security requires preserving Bazan's capabilities, as Israel cannot rely solely on imported refined products. Bazan will continue to cooperate with the state to ensure Israel's energy independence and security."
