Further development of the Israeli petrochemicals sector will depend on access to feedstock, particularly ethane, according to BMI’s latest Israel Petrochemicals Report. Lacking significant oil and gas reserves, Israel is dependent on imports for feedstock. This places the Israeli petrochemical sector at the mercy of both global market volatility and political factors. As such, Israel is diversifying its oil and gas supplies. In Q208, the government indicated that it was looking at sourcing oil and gas from Azerbaijan. In an interview with Azerbaijan’s Trend Capital, Benjamin Ben Eliezer, the Israeli minister for infrastructure, indicated that talks on gas imports were at an early stage, but said that Azerbaijan could offer a strategic source of supply as gas consumption rises from over 2bn cu m per annum in 2008 to 12bn cu m by 2015. He also raised the prospect of linking Israel to the Baku- Tbilisi–Ceyhan pipeline that carries oil from Azerbaijan to the Turkish port of Ceyhan. Downstream development continues to progress.

In April 2008, ICL announced major capacity expansions at its ICL Fertilisers subsidiary, in response to rapid growth in demand in emerging markets such as Brazil, China and India. According to ICL, the four main drivers for demand for fertiliser are: demand for high-quality food, growth in fertiliser-intensive biofuel crops, the desire to improve crop yields in order to take advantage of high food prices and high fertiliser prices as demand has outstripped supply. ICL plans to increase production of phosphate rock by 500,000tpa to 4.5mn tpa in 2008 by utilising exceed capacity and it is considering an additional 600,000tpa increase in capacity by 2010. It is also considering plans to increase capacity of fertiliser-grade phosphoric acid by about 40,000tpa in 2008 with a view to an overall increase in capacity by 250,000tpa by 2011.

Additionally, ICL will increase production of potash by 250,000tpa by increasing carnallite production capacity at the Dead Sea gradually by 2011. ICL produces about 10% of the world’s potash and is the leading provider of pure phosphoric acid and a leading producer of specialty phosphates. The Israeli petrochemicals industry business environment is relatively less favourable when compared to Middle Eastern rivals such as Saudi Arabia, with their large feedstock reserves and production capacity. It has a better competitive environment, however, given a broad product portfolio and an established downstream chemical industry. In BMI’s Middle Eastern Petrochemicals Business Environment Rankings matrix, Israel remains in sixth place with a score of 56.4 points, 0.4 points below the regional average. Compared to competitors’ scores, Israel is 0.5 points behind Iran – the region’s second largest petrochemicals producer after Saudi Arabia – and 1.8 points ahead of South Africa.