January 2006

Ashdod Refinery Presentation

Company and transaction overview

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Disclaimer

This Document (the “Document”) has been prepared by HSBC Bank plc ("HSBC"). HSBC is acting as financial advisor to the Government Companies Authority of Israel (the "GCA") and no one else in connection with the proposed privatisation of Oil Refineries – Ashdod Limited (“ORA”, or the “Company”).

This Document contains forward-looking statements, sourced exclusively from publicly available information, the GCA or Oil Refineries Limited (“ORL”). These statements are based on certain assumptions, which include a number of known and unknown risks and uncertainties that may lead to the non-occurrence of these statements.

The information contained in this Document has been provided by the GCA, ORL, or from publicly available information and has not been independently verified by HSBC. None of GCA, ORL, ORA, HSBC nor any other person makes any representations or warranties as to the accuracy, completeness or fairness of this Document and, no responsibility or liability is accepted for its accuracy or sufficiency. No representations or warranties are given as to the achievement or reasonableness of, and no reliance should be placed on, any projections, forward-looking statements, estimates, forecasts or targets contained herein. None of the GCA, ORL, ORA nor HSBC undertakes to provide any additional information, to update the information included herein or to remedy any omissions in this Document.

This Document does not constitute an offer or invitation for the sale or purchase of securities or of any of the assets, business or undertaking described herein. Nor does this Document constitute an obligation or undertaking to conduct a future sale of securities or of any of the assets, business or undertaking described herein. This Document is not intended to form the basis of any investment decision to purchase ORA. The selection of a buyer for all of the ORA shares, as a single stake, will be conducted according to the sale procedure of the shares of ORA (the “Sale Procedure”) to be published by the State of Israel.

This Document and its contents are based on the assumption that at the time of the sale of the Shares, the shares of ORL will be owned 100% by the State of Israel. The assumed shareholder structure is subject to completion of arrangements between the current shareholders of ORL (The State of Israel, 74%, and Israel Corporation, 26%).

The information relating to the sale process, structure and timetable is purely indicative and may be altered, modified or cancelled at any time by the GCA. Details of the sale process and sale structure of the Shares, if applicable, are officially announced in the Sale Procedure.

By accepting this Document, the recipient agrees to be bound by the foregoing limitations.

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Notice to Reader

This Document and its contents are based on the assumption that at the time of the sale of the Shares, the shares of ORL will be owned 100% by the State of Israel. The assumed shareholder structure is subject to completion of arrangements between the current shareholders of ORL (The State of Israel, 74%, and Israel Corporation, 26%).

Information in this Overview has been prepared as at 9 January 2006.

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Contents

Transaction background

Overview of the Ashdod Refinery

Overview of Israel’s oil market

Section 1

Section 2

Section 3

Transaction background

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Transaction overview

The State of Israel, through the Government Companies Authority (“GCA”), has initiated the process of privatising Oil Refineries Limited (“ORL”)

The process involves the restructuring of ORL, whereby the Ashdod Refinery will be carved out of ORL, transferred into a newly established subsidiary company and sold in a private sale process (the “Transaction”)

– The Company, called Oil Refinery – Ashdod Limited (“ORA”), was incorporated in January 2006

– The Ashdod Refinery and other associated assets and liabilities are to be transferred into ORA simultaneously with the completion of the Transaction

The GCA is managing the Transaction in collaboration with ORL’s management

HSBC Bank plc is advising the GCA in relation to the sale process

ORL, which will continue to own the Haifa Refinery, will subsequently be privatised through an Initial Public Offering

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ORA transaction overview

ORL situation after ORA sale

ORA is sold to an investor through a private sale process

ORA becomes active independent company upon completion of the Transaction

Competition between ORL and ORA

Industry liberalisation

ORL situation before ORA sale

Israel’s only refining player

Ownership in several petrochemical subsidiaries

Operates in regulated environment

– Price controls

– Vertical integration prohibited

1. This document and its contents are based on the assumption that at the time of the sale of the ORA shares, the shares of ORL will be owned 100% by the State of Israel. The above shareholder structure is subject to completion of arrangements between the current shareholders of ORL (The State of Israel, 74%, and Israel Corporation, 26%).

2. Includes major subsidiaries only 3. Petrochemical subsidiaries4. Lubricants oil subsidiary

New Investor

ORA

Ashdod Refinery

100%

50%50%

State of Israel 1

ORL1

Gadiv3 Carmel Olefins3

Haifa Basic Oil4

100%

Haifa Refinery

100%

50%50%

State of Israel1

Gadiv3 Carmel Olefins3

Haifa Basic Oil4

100%

ORL2

AshdodRefinery

HaifaRefinery

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Overview of ORL refinery operations

Ashdod Refinery

Commissioned in 1973

90,000bbls/d crude refining capacity

7.5 Nelson Complexity Index

Storage capacity of 700,000m3

Private sale process initiated

Haifa Refinery

Commissioned in 1938

180,000bbls/d crude refining capacity

7.2 Nelson Complexity Index

To be privatised through Initial Public Offering

Source: ORL Source: ORL

Source: ORL, industry research Source: ORL, industry research

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ORL financial summary

Turnover 11,513,780 14,072,744 18,862,798 20,187,228Total operating costs 11,643,373 13,821,979 17,767,377 18,519,289EBITDA 166,364 574,130 1,435,702 1,932,866DD&A 295,957 323,365 340,281 264,927EBIT (129,593) 250,765 1,095,421 1,667,939Interest expenses (78,187) 82,896 (176,882) (133,713)Other expenses - (17,400) (2,200) -Profit before tax (207,780) 316,261 916,319 1,534,226Net income (109,498) 220,404 773,292 1,168,300

Current assets 2,731,486 3,719,481 5,122,480 7,065,997Long term investments and loans 74,556 84,590 113,818 116,223Fixed assets 3,649,425 3,598,898 3,623,807 3,879,446Other assets and deferred expenses 180,979 222,072 339,442 445,162Total assets 6,636,446 7,625,041 9,199,547 11,506,828Current liabilities 2,444,364 3,260,647 3,476,412 4,755,417Long term liabilities 2,287,529 2,272,436 2,890,954 2,768,072Total liabilities 4,731,893 5,533,083 6,367,366 7,523,489Shareholders’ equity 1,904,553 2,091,958 2,832,181 3,983,339Total liabilities and shareholders’ equity 6,636,446 7,625,041 9,199,547 11,506,828

P&L (financial year)

Balance sheet (at end of period)

000’s NIS 2002 2003 2004 1st 9 months 20051

Source: ORL(1) Balance sheet as at 30 September 2005

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Changing Israeli regulatory environment

Increased liberalisation

Vertical integration allowed between refiners and retailers

Entry into other businesses such as power generation and water desalination allowed

Industry structure

Removal of price controls at the refinery gate

However, competition monitored to avoid market failurePrice controls

No vertical integration permitted across the downstream value chain

Price controls in effect– For all products at refinery gate

– For gasoline at the pump

Current situation Post-ORA sale

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Legal framework of privatisation and liberalisation

Main documents:

State of Israel’s Resolution on Privatisation of 26 December 2004

National Interest Order

Interested parties should inform themselves of all other relevant laws, regulations and Government resolutions

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Key milestones of ORA sale process

Transaction announcement1

Submission of Expressions of Interest to GCA

2

Initial screening of participants

3

Due diligence and review4

Submission of proposals7

5Final screening of

participants

6Sign-off of Sale and

Purchase Agreement

Selection of preferred offeror

8

Completion and closing9

Overview of the Ashdod Refinery

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Background and history

Ashdod Refinery

Located 4km north of Ashdod city

Considerable population growth in Ashdod in last 30 years

Refinery construction started in 1970

Completed in 1973

Rationale for construction at location:

Services high oil products demand area in the centre of Israel

Benefits from close proximity to an existing crude oil terminal and the coastal power plant, and access to main product pipelines

Provides employment for immigrant population

Enhances Israel’s diversity and security of energy supply

Haifa Refinery

Ashdod Refinery

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Transportation

Ashdod Refinery connected to

– Ashdod, Ashkelon and Eilat ports and terminals

– Haifa Refinery

Own storage capacity of ~700,000 cubic metres

– ~200,000m3 for crude oil and feedstock

– ~500,000m3 for intermediates and products

Other transport infrastructure

– Modern truck loading rack

– Connected to two sea-lines

Product shipments

– Directly by pipeline or truck

– Indirectly by sea

– Pipeline shipping accounts for approximately 60% of product transport

Haifa Refinery

Midstream and downstream infrastructure

Haifa port

Third party terminalAshkelon portand terminal

Eilat port

Ashdod Refinery

IEC sea-lines

PipelineTrucks Ships

National pipeline

grid

Truck load rack forFuel oil

LPGDistillates

Crude oil

Crude oil

Crude oil

Source: ORL(1) The pipeline does not cross the sea-line and is thus represented differently

Import / export of intermediates

& products

Pipeline1

Pipeline

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Plant capacity

Crude 90,000bbls/d

Vacuum 46,000bbls/d

Visbreaking 26,000bbls/d

Fluid catalytic cracking 29,000bbls/d

Catalytic reforming1 12,000bbls/d

Catalytic hydrotreating

– Naphtha 22,000bbls/d

– Kerosene 14,000bbls/d

– Gasoil 17,500bbls/d

– FCC gasoline 18,500bbls/d

Oxygenates 900bbls/d

Source: ORL(1) Semi-regeneration

Source: ORL

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Upgrade and new builds

1984 – Vacuum tower modernised

1987 – Visbreaker overhaul

1990/1992 – Major expansion programme with addition of FCC1 unit, SRU2 and MTBE3 plant

2003– New FCC gasoline HDS4 introduced

– Debottlenecking of naphtha and distillate hydrotreaters– New truck loading terminal– FCC reactor replacement and modernised

2005 - Piped natural gas from offshore field

Upgrades and new builds

(1973-2005)

43MW natural gas-powered co-generation plant

New SRU2 plant

Safety, environmental and reliability projects

Ongoing and future projects

(1) Fluid catalytic cracker(2) Sulphur recovery unit(3) Methyl tertiary butyl ether(4) Hydro desulphurisation

Source: ORL

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Health, safety and environment

Good safety record

All projects meet current Israeli HSE specifications

Capable of producing EURO IV1 compliant products

ISO certification:

– 9000 – quality

– 14000 – environment

– 18000 – safety

Efficient ongoing co-operation with local authorities

Source: ORL(1) European Regulatory Standard for Transportation Fuels effective 2005

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Employees and management

~200 permanent operating staff

– Highly skilled workforce

– High proportion of engineers

~30 additional temporary employees

Limited management staff

– Many functions provided/controlled centrally by ORL

45%

33%

12%

1% 1%3% 5% Management

Security

Operations

Safety, Health & Environment

Maintenance

Human resources

Other

Source: ORL (1) This unit is based in Asdod Refinery, but is under the control of and reports to ORL’s management in Haifa

MaintenanceHealth Safety

Environment QualityProduction

Planning and Supervision of

Maintenance Work

Central & Regional

Maintenance

Instrumentation Electricity and

ControlSafety and Risk

Quality Laboratory

Ecology Plant InspectionProcess

ManagementProcess Units

Products and Loading

Manpower and Organisational

Extension 1

Projects Extension 1

Ashdod Refinery Manager

Security and Administration

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HVGO 500,000

High octane components 49,000

Propane Variable

Product Quantity (tons per annum)

Inter-refinery relationships

Essential feedstocks and blendstocks transferred between the Haifa and Ashdod Refineries

– Approximately 7-10% of throughput of each refinery transferred from one site to the other

– Currently treated as internal transfers

Formal procedures established and agreements drafted between ORL and ORA to maintain these important relationships

– One-year agreements will be effective at the time of the Transaction

– Renewable by mutual consent after 12 months

Product flows from Haifa to Ashdod

Heavy/light naphtha 188,000

Propylene 50,000

Blending components Variable

Product Quantity (tons per annum)

Product flows from Ashdod to Haifa

Source: ORL

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Transitional arrangements

Current situation

Ashdod Refinery managed and operated as an integral part of ORL

Approximately 200 operating staff, with limited management / supporting functions

Ashdod Refinery dependent on ORL at the time of Transaction

Additional employees required to manage Ashdod Refinery as a stand-alone operation

– Commercial and financial functions

– HR, legal, technical, comptroller, IT

Transition period

Effective upon closing of Transaction

Purpose is to transfer all relevant responsibilities and management to ORA’s new owner

ORL will offer specific services to ORA upon request in specific areas of operation, until functions can be operated by new owner

– Transition Period may last between 3 to 12 months depending on the nature of service(s) provided

– Will enable seamless transition of Ashdod Refinery management

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ORA pro-forma balance sheet

Receivables and debit balances 453

Inventory 1,230,494

1,230,947

Long-term investments and loans

Loans 1,359

1,359

Fixed assets

Property, plant and equipment 640,775

Materials and spare parts 34,935

675,710

Other assets and deferred expenses 91,846

Total assets 1,999,862

Assets Liabilities and shareholders’ equity

Source: ORL(1) The pro-forma balance sheet is subject to amendments and will be finalised at a later stage in the sale process

Current maturities of long term loans 123,560

Payables and credit balances 15,636

139,196

Long-term liabilities

Debentures 455,308

Bank loans 219,993

Deferred taxes 148,897

Liabilities for severance pay, net 11,619

835,817

Total liabilities 975,013

Contingent liabilities and commitments

Shareholders’ equity 1,024,849

Total liabilities and shareholders’ equity 1,999,862

Balance sheet1 as of 31 December 2004 (000’s NIS)

Overview of Israel’s oil market

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ORL product flows

Approximately 8.9million tons of crude processed in the 9 months to September 2005

100% of crude oil needs imported, mostly from Russia, FSU1 and the Caspian Sea

Historically imports from Egypt, Norway, West Africa and Mexico also featured

ORL currently imports crude oil for both refineries

Crude oil

9 months to end of September 20052,3

– 9.2 million tons sold

– Export sales account for ~25% of total product sales

Refined products

(1) Former Soviet Union(2) Includes both Ashdod and Haifa refineries product sales(3) Source: ORL(4) YTD 2005

Refined products split – Ashdod Refinery 4

Source: ORL

5%

26%

5%23%

9%

21%

11%

Naphtha

Gasoline

Kerosene

Gasoil

Fuel oil

Other

Diesel

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Israel oil product demand

Stable motor gasoline demand due to increased efficiency of vehicle fleet

Diesel demand growth in line with economic growth

Gasoil growth driven by electricity demand

Gradual decline in heavy fuel oil due to natural gas substitution

Increasing naphtha demand supported by growing petrochemical industry

Modest increases in kerosene demand

LPG use in line with economic growth

Source: ORL estimates(1) Data does not include ORL’s own consumption and military use

Israel oil product domestic consumption (000’s tons)1

Israel oil product imports (000’s tons)

LPG KeroseneGasoline DieselGasoil Fuel Oil Bitumen Petrochemical feedstock

771 667 718 762 767 754

2,337 2,382 2,447 2,535 2,578 2,577

846 701 604 835

3,7373,382 2,961

1,1171,061 1,054 1,136

992 1,097

11,63210,678 10,580 10,975

10,173 10,354

462 431 442 461 472 483

2,123 2,048 2,077 1,994 2,094 2,162

447 594

3,098 2,2532,432193234

288287260239

0

2,000

4,000

6,000

8,000

10,000

12,000

2000A 2001A 2002A 2003A 2004A 2005A

279 412 323

1,526 1,4431,065

2,454 2,451

2,097

2,488

1,757

1,475

15072103824296239448

65662755355230

14

30293129

198

1,078779

1,501

0

500

1,000

1,500

2,000

2,500

3,000

2000A 2001A 2002A 2003A 2004A 2005A

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Current oil market structure

Source: ORL, industry research

Crude import(ORL)

Storage and supply(PEI, EAPC and Pi-Gliloth)

Fuel companies(Paz, Delek, Sonol, Dor Alon)

Fuel Stations Agriculture IndustryPower

StationsTrade

and ServicesAirports

Crude

Refined products

Mid

str

ea

mD

ow

ns

tre

am

Import of distillates(Fuel companies)

Storage and transportation of crude(PEI – Tashan)(EAPC – Katza)

Import, heavy oils and coal(Israel Electric Co.)

ORL

Ashdod Refinery Haifa Refinery

Ports (Bunkering)

UNEX