The Israeli Refining & Petrochemicals

Market Bazan Group

IENE CONFERENCE

Oil Refining, Storage and Retail in

SE Europe International Conference
Avner Maimon | CEO BAZAN Group

March 2017
 Background
❖ Leading Eastern Mediterranean Refinery - Nelson
Complexity index of 9.0 (above European average)
❖ Integrated Refinery and Petrochemical business.
❖ Israel’s Largest Refining & Petrochemical Group – 62% market
share in Israel
❖ Listed on TASE (ORL): Market Cap: Nis 4.9/ $ 1.3 bn

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Variety of products & activities in one location
Fuels Business Unit - One of the biggest refineries in the region
(max. 200,000 bpd) with complexity index going to 9.0.
Exports typically between 30% - 40% of its production.
Domestic market share is around 62%

Polyolefins Business Unit - Manufactures various grades of Polypropylene

(max. 450,000 tpa) and Low Density Polyethylene (max 170,000 tpa).
Exports about 60% of its Polyethylene and Polypropylene. Domestic market share
of about 50% for Polypropylene and 80% for Polyethylene

Aromatics - Producer of Aromatics and Solvents

(max. 545,000 tpa). Exports about 95% of its production,
the domestic market being relatively small

Base Oils / Waxes - Produces Base oils & Paraffin

Wax and exports about 50% of its products.

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Shareholding Structure

Israel Corp.
Israel's largest holding company and
one of the top ten companies listed
on the Tel Aviv Stock Exchange
Israel Crop (TASE: ILCO) in terms of market
Public 37% capitalization.
(TASE)
47%
Israel Petrochemical
Enterprises Ltd.
Israel (IPE) is a public holding company
Petrochemical whose shares are listed on the Tel
Enterprises Aviv Stock Exchange. Engaging
16% primarily in energy & polyolefin areas.

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A strategic producer of the Israeli Economy

Gasoline and
LPG Marine Fuels Jet Fuel Diesel

Lube Oil and Industrial Aromatics Raw Materials for the

Vaxes and Solvents Bitumen plastic Industry

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 History
1938 1959 1973 1991 1994
The refinery Incorporated & registered Ashdod Oil Refinery Carmel Olefins Ltd. Gadiv
was built by in Israel as a government (90,000 barrel a day) Was formed (50% Petrochemicals was
BP- SHELL owned company. started operation. Bazan & 50% I.P.E) purchased by Bazan

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

2006 2007 2009 2010 2011 2013

Ashdod The company Completing Haifa Basic Oils Purchase of Ducor Hydrocracker is
refinery was was privatized Bazan & Carmel purchased and is Petrochemicals bv commissioned
sold to Paz Oil and floated on Olefins merger. 100% Bazan. of the Netherlands, The Group
as part of the Tel Aviv a polypropylene converted fully
government stock exchange. producer. to the use of
privatization NG as fuel for
policy. its units.

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Strategic Regional Location
Cost Advantage due to Close Proximity to Growing Markets
Russian & Caspian Crudes Short of High Quality Fuels
498
Thessaloniki
250
Izmit 603
CPC Pipeline Kirikale
520
Izmir
Atyrau
Greece Turkey Batman

Aspropyrgos
Novorossiysk
Elefsina
Corinth

Supsa
T’bilisi
Samsun
Banias
BTC Pipeline Homs
Baku
Cyprus

Lebanon
Ceyhan Syria

ORL
(62% market share)
Ashdod
El Mex
Libya Amiriyah Israel
Haifa Midor

Ras Lanuf
Jordan
Tanta

Egypt

Map Crude Planned Oil Product Refined product Domestic production

Oil Pipeline Refinery
Legend Flow Pipeline Sales consumption (kb/d) (kb/d)
National
Infrastructure
ORL
HAIFA
PORT

ISRAEL
ASHDOD
PORT
PAZ

ASHKELON
PORT

Refinery

Port

Pipeline
Eilat
PORT 8
Bazan is strategically located in an industrial
zone close to the main Northern port
HAIFA PORT
TASHAN fuel tanks

GAS farm
BAZAN area

HAIFA Chemicals
GADOT

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Our integrated yard

Gadiv

ORL
Haifa Basic Oils

Carmel Olefins

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Integration of Refining & Chemicals
Bazan's full integration of Refining & Chemical businesses allows it to achieve significant synergies
CAOL (polymers), GADIV (aromatics) and HBO (lube oils and vaxes) business fully integrated

More profit, lower risk

❖ Synergy effects
❖ Different business cycles

Margin improvements
❖ Optimizing feedstocks
❖ Enhancing yield value

Cost savings
❖ Energy and utilities
❖ Administration

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Responsibility and Sustainability
Bazan Group continuously operates with a strong sense of corporate
responsibility, aiming at sustainable activity and development in a socially and
environmentally responsible manner:
 Implementation of targeted investments aiming
for continuous responsible development and
optimization of its productive activities.

 Continuous implementation of environmental

improvements and projects, meeting strict
environmental European standards.

 Involvement in the community, harnessing the

company's resources and employees to
strengthen the surrounding population and
encourage technological education.

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Significant improvement of the air quality
Reduction of emissions from Haifa refinery
Sox kg/h Nox Kg/h
450
680

399 270

64
42

2004 2006 2008 2010 2012 2014 2015 2016 2004 2006 2008 2010 2012 2014 2015 2016

EMISSION NI & V KG/HR Particals kg/h

26
0,34

12
0,14
Natural
Gas 0,03 0,02 0,8
2012
2V 1NI 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Haifa Bay Municipal Association for Environmental Protection 13

 Snapshot of Israel’s Economy
❖ Israel has a modern and dynamic GDP per-capita 2015
economy, with a GDP per-capita of
$36,500
69 $1000

❖ Population growth is ~2% per year

and the population is younger than 49 48 46 43
in most advanced countries 37 37
❖ Israel is a technology orientated and 29 26
highly open economy, with exports
amounting to 30% of GDP

Ireland Austria Denmark Belgium OECD Israel New Portugal Greece

Source: Bloomberg March 2017 Avg Zealand

The “peer group” consists of economies with a similar weight in the

MSCI Developed World Index - less then 0.5%

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Israel 2016 – annual growth rates
Israel – A developed economy with some
emerging market features

❖ Israel's economy grew by 4% in 2016

(2.5% in 2015 and 3.2% in 2014) exceeding the growth rate
of OECD which averaged 1.7%
❖ Economic growth was also indicated by import and export figures:
• Import of goods and services in 2016 climbed 9.5%,
following a 0.5% drop in 2015
• Exports grew by 3%, after a 4.3% slump the previous year.

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2016 Results
ORL Refining Margin vs. Regional Benchmark ($/bbl)
9.2
Ural Reuters
ORL
6.4 6.2

4.9 5.2 4.8

4.2 4.0

2.7
1.7 2.0
1.2

2011 2012 2013 2014 2015 2016

Note: Adjusted margin is ORL’s refining margin calculated for comparison purposes and excludes impact of inventory and IFRS

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Operational Profitability Trend
EBITDA, adjusted (USD millions)
677
30

206
421 427
17 11
141 202

263 441 214

2014 2015 2016

Fuels Polymers Others

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Financial Leverage
Net Debt/EBITDA – Decreased recent years due to
improved profitability and financial management

7,7

3,3
2,8
2,1

31.12.2013 31.12.2014 31.12.2015 31.12.2016

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Strong competitive position
High Quality Refinery
One of largest and most complex refineries in Eastern Mediterranean.
Fully Euro 5 compliant Highly professional and experienced Work Force

Strategic Location
Dominant player in Israeli market
Strategically located with access to regional crude supply and fast growing
Eastern Mediterranean markets

Full integration with Petrochemicals

Full integration of Fuels, Polymers, Aromatics & Lube Oils
Single site integration drives synergies resulting in higher aggregate margins and flexibility

Substantial upgrading completed

Operated on Natural Gas since July 2011- Full supply secured starting April 2013
Mild-Hydrocracker completed in 2010
Petrochemicals synergies of the Group’s various plants
Full conversion Hydrocracker - 2013

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Thank You!

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