It's been a year since The Israel Corporation bought Oil Refineries, the Haifa part of it, from the government. Yashar Ben Mordechai, Oil Refineries chief executive for the last eight years, has therefore had the rare experience of experiencing both worlds: the bureaucracy-laden, sluggish world of government-owned business and the roaring world of private enterprise in the embrace of the Ofer group.
"The greatest difference between the two worlds is the speed at which decisions are made," he says. "When we were a government company, we were blocked from implementing business decisions, because of restrictions due to our monopolistic status and other things. Every business decision required government permission, and the process killed almost every deal. Fifteen years ago we managed to buy Gadiv and that's it, practically."
You haven't carried out any meaningful acquisitions in the last year either.
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"Within three months we produced a $1.1 billion investment plan. I don't think it would have happened that fast at a government company. Private owners want growth, and fast. They tell you, Grow, Do more. It's a terrific driver. You bring an idea, it doesn't die in years of discussion."
The change required mental switches, Ben Mordechai notes. "You're cast into a different world of responsibilities because you aren't just supposed to preserve what's already there. But the truth is that it's very challenging. It enables you to exploit all the knowhow and experience you've gained, and it isn't boring for a second." Yes, he works harder, he acknowledges.
Oil Refineries today consists of one refinery, in Haifa. It used to be two, including the one in Ashdod, which now competes with the Haifa facility.
Ben Mordechai left his parents' home in Istanbul at age 17 and moved to Israel by himself, impelled by pure Zionism, he says. He learned Hebrew in Haifa and then began working at the Ashdod oil refinery, while studying engineering. He was drafted at age 22 but the army permitted him to continue working there for his livelihood. When discharged he remained at the Ashdod refinery as a regular worker and climbed the corporate ladder. He moved to the Haifa refinery in 1996, a year later became its VP and in 2000, at the tender age of 44, was tapped for the top seat by the board of directors. He was the youngest CEO in the company's history.
How does a young immigrant from Turkey with no political backing or union support advance that fast?
"It may not be typical of other government companies, but at Oil Refineries the union doesn't influence the choice of CEO," he explains. "I was professional and wanted to advance, so I undertook extra missions beyond my usual work. Oil Refineries always was a company that enabled managers to advance."
In 2007, Oil Refineries declared a four-year strategic plan that splits the company into three divisions: refining, commerce, and petrochemicals. The plan called for entry into new areas, such as international trading in crude oil, distillates and chemicals, and electricity production. That year the company reported a 28% jump in profit to NIS 700 million, yet this year its stock has fallen 15%.
As Oil Refineries was not only privatized but floated, its share price is of great interest to the public. Ben Mordechai points out that Oil Refineries is a "long-term" type company: its plans are investments for the long run and should be judged in the long term and not by momentary fluctuations in its stock.
By the way, that goes for "greening the industry" too, and Ben Mordechai is infuriated by a recent Environmental Protection Ministry report that, yet again, damns Oil Refineries for polluting.
"That ridiculous report didn't factor in natural emission of particle pollution, which is the main part of emissions into the air. It didn't consider that we are emitting at a height of 80 meters, while public transportation emits particles at the height of your face," he growls.
"That entire report is a manipulation of information, if not worse. In recent years the industry has done a great deal to improve its environmental credentials. To present it today as blacker than black, is a manipulation."
Marketing margins in refining are limited, say some, but Ben Mordechai points out that the world is growing, mainly in the East. "More mouths are eating meat," he says, more engines are working, urbanization stirs demand for plastic. All these mean - fuel.
World demand for oil is increasing by 1.5 million barrels a day, meaning six new refineries a year (and few companies are equipped to build such facilities) that have to comply with new awareness of environmental issues, even in China. Refining is an industry with inherent shortage working close to full capacity, and it will remain profitable, he insists.
Will oil reach $200 a barrel?
No fool he, Ben Mordechai refuses to predict. "I remember during the oil crisis of the 1980s, oil shot up to $40 and Shell predicted it might reach $120. Well, it fell back to $9 in early 1996." True, marginal costs are rising, he says: deep-sea drilling costs $70-75 per barrel, so there is a new bottom. Where will it end? Don't ask him.
So how does the company prepare a business plan? The answer lies in diversification, into other areas and countries. Oil Refineries is presently examining investment possibilities in China's petrochemicals and refining industries, he confides.
It knows the area well through The Israel Corporation's sister companies, also owned by the Ofer group. And what might its edge be against the Middle Eastern traders?
"We know the markets better," insists Ben Mordechai, adding, "and we have a good team. Also, the fact that Oil Refineries already transports crude shows that we have a platform to leverage our transport services. We have leased seven tankers and mean to expand that fleet."
Last year was one of upheaval for Israel's fuel industry: Oil Refineries was privatized, Delek Group bought the Pi Glilot fuel depot and threatened to open a third refinery in Israel, Sonol and Dor-Alon allied. Ben Mordechai ignored rival companies' threats to start importing distillates rather than buy from Oil Refineries, and at the end of the day - this year at least - they still buy fuel from his company. The alternative of importing fuel doesn't pay.
Ben Mordechai firmly denies market allegations that Oil Refineries took steps (slashed prices) to break Delek Group by nabbing its clients: pricing is a factor of the alternative, which is imported fuel, he says. "Market forces are greater than us," he says to drive home his point.
Does he share the view of many, that splitting the original Oil Refineries, incorporating the Ashdod and Haifa refineries as separate and competing entities, was a mistake? Yes and no: Privatization was not a mistake, but the split was, he says.
The whole world is consolidating and over here, the company is being split. That's not the way to lower fuel prices, he chides. And even though his boss Idan Ofer is pushing the electric car idea, he doesn't see danger to the company.
Ofer is a businessman who has and should have a finger in many a pie, Ben Mordechai explains. But he personally sees no alternative to carbon-based fuels, unless of course somebody invents a car that uses garbage for fuel. And right now, that's in the realm of science fiction, he concludes.
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