Economic Questions Dog Israel's New Desert Ammonia Plant Plan

Main obstacle to finalizing financial benefits for potential bidders is opposition to closing current plant in Haifa, though residents were promised it would be shuttered.

Hagai Frid

Construction of a new ammonia plant in the Negev to replace the one in Haifa has been delayed by questions about the project’s economic feasibility.

Companies bidding on the tender to build the plant were supposed to have submitted their bids in another few days. But earlier this week, the Environmental Protection Ministry announced that it would postpone the deadline by three months

In conversations between government representatives and potential bidders over the past few months, the latter had raised fears that the planned facility in the Mishor Rotem industrial park wouldn’t be economically viable. Therefore, the government decided to improve the tender’s financial terms, and postponed the deadline to give it time to do so.

One of the main concerns is that under the current tender terms, whichever company won the tender might have trouble raising the necessary capital afterward. That would force the government to issue a new tender, resulting in a major delay.

The government is supposed to give the bidders the revised tender terms within the next two weeks. The state has already agreed to provide a grant and various financial guarantees to assist the facility’s construction. Nevertheless, some issues remain unresolved, including the price of natural gas, which is the raw material from which ammonia is made, and concerns over the fact that the Israeli market is relatively small. Currently, the new plant would be forbidden to export its produce.

The main obstacle to finalizing the new financial benefits is the fact that certain government officials oppose closing the ammonia plant in Haifa, even though the cabinet has already decided to do so. Some National Security Council officials believe the Haifa plant could remain in operation, even though security concerns were one reason for the decision to move it to the Negev.

Hezbollah leader Hassan Nasrallah in February threatened to attack the Haifa plant if another war breaks out between Hezbollah and Israel, warning in a speech: “[W]e can say that Lebanon today has a nuclear bomb, seeing as any rocket that might hit these tanks is capable of creating a nuclear bomb effect,”

The Environmental Protection Ministry counters that Haifa residents were promised that the plant would be closed, and this promise should be kept.

The Haifa plant is currently run by the Haifa Chemicals company. It supplies ammonia to Haifa Chemicals and other industrial facilities throughout the country, as ammonia plays a role in various manufacturing processes, as well as refrigeration.

Zalul, an environmental group working to get the ammonia plant in Haifa closed, recently urged the Environmental Protection Ministry to simply announce that the tender for the Negev facility has failed and adopt a different proposal – building two smaller plants, one in Haifa and one in Ashkelon. This is one of the alternatives to the existing plant proposed by a consulting company hired by the ministry.