Oil Refineries, Dorad Energy exposed to Turkey
The deterioration in relations with Turkey, which could reach a complete severing of ties, is liable to have serious consequences for key Israeli energy companies, according to a top government official. Figures obtained by "Globes" indicate that about 80% of Israel's crude oil, purchased from Russia and Azerbaijan, passes through the Baku-Tbilisi-Ceyhan (BTC) pipeline, which transverses Turkish territory, or is carried by tankers through the Bosphorus.
Turkey can block the tankers' transit through the Bosphorus, or deny tankers access to the Ceyhan terminal. In such a case, Oil Refineries Ltd. (TASE:ORL) will have to seek more distant sources of crude oil in Africa or Latin America, which would raise costs
It is important to note that this is an extreme scenario, which could complicate Turkish relations not only with Israel, but with the international oil companies that operate the BTC pipeline. It would be a technically complex measure to implement, because tankers do not usually disclose that the oil is designated for Israel. The government official said, "There is no doubt that Israeli refineries have contingency plans for such cases, but obviously this would be an act with significant economic consequences."
Another company liable to be affected by the deterioration in relations with Turkey is private electricity producer Dorad Energy Ltd. Dorad has held a provisional electricity production license since 2004, and has an power purchasing agreement, described as "strategic", with the Ministry of Defense.
Turkey's Zorlu Industrial and Powerplants Construction Co. Inc. has owned 25% of Dorad since 2004. Zorlu is one of Turkey's largest conglomerates, with industrial, banking, financial, and energy interests. It is also the chief contractor for Dorad's power station, which will cost an estimated $1 billion to build. Zorlu will also maintain the power station for 25 years.Dorad is relying on a statement by Turkey's minister of trade and industry this morning that commercial relations with Israel willnot be affected. Dorad said, "It's business as usual for us." It added that equipment for the power station, most importantly the turbines from General Electric, will be delivered directly from the US manufacturer.