Ashdod Refinery: After Paz, Will Exports Replace Volume Or Dilute Margin Quality
The 2026 Paz agreement cuts Paz to about 30% of forecast sales volumes, and the 2026 order book opened at about $1.5 billion versus roughly $2.2 billion a year earlier. The real question is no longer whether Ashdod will sell the barrel, but how much of the gap is closed in domestic contracts and how much is pushed into exports with weaker economics.
What This Follow-Up Is Isolating
The main article already established that the plant is back and that 2026 will be judged less by whether Ashdod Refinery can run and more by whether it can commercialize the volume. This continuation isolates the commercialization layer itself. The issue is not only that less volume goes to Paz. The issue is what kind of volume replaces it.
That matters now because Ashdod actually ends 2025 from a relatively favorable commercial base. Domestic sales reached 85% of total sales, versus 80% in both 2023 and 2024. At the same time, exports fell to $464 million, 15% of sales, from $656 million, 20%, in 2024. Other domestic customers also rose to $1.075 billion, 36% of sales, versus $1.004 billion, 32%, a year earlier. In other words, the year that just ended was a better mix year, right before the new Paz agreement reduces the anchor demand base.
This chart highlights the paradox. On one hand, Ashdod already showed in 2025 that it can broaden domestic sales beyond Paz and reduce the export share. On the other hand, even after that improvement, Paz still represented 49% of revenue and 48% of sales volumes. So the 2026 reset does not hit a weak sales system, but it does hit a system still leaning too heavily on one anchor customer.
This Is Not Only Less Paz, It Is A Different Contract Layer
What matters most in the 2026 Paz agreement is not only the volume reduction. The old agreement, which ran through the end of 2025, was described as a broad framework for diesel, gasoline 95, fuel oil products, kerosene, jet fuel, naphtha, or other products, with annual and monthly quantities and a Take or Pay mechanism. By contrast, the new 2026 agreement is described as covering only gasoline 95, transport diesel, and jet fuel, with monthly and annual quantities, price formulas, dispatching and storage arrangements, and some volume flexibility retained by Paz.
That is important because the reset is not just healthy deconcentration. The contractual basket itself is narrower. Ashdod is not only losing a share of volume from Paz. It is entering 2026 with an anchor contract that is described around three core products rather than the broader product basket that framed the old arrangement.
| Checkpoint | 2025 and the prior setup | 2026 signal | Why it matters |
|---|---|---|---|
| Paz share of sales volume | 53% in 2023, 47% in 2024, 48% in 2025 | About 30% of forecast volume | Roughly 18 points of anchor customer volume come out |
| Another large customer | 11% to 12% of volume across 2023 to 2025 | Not presented as a new step-change | The second pillar exists, but it is not the whole answer to the Paz gap |
| Contract structure with Paz | Broad framework with Take or Pay | Annual agreement with volume flexibility and storage/dispatch arrangements | It is not only less volume, it is a different certainty layer |
| Mix going into the reset | 85% domestic sales and 15% exports in 2025 | The company estimates future exports above 25% of sales | Even if barrels are sold, sales quality can still deteriorate |
This table shows why it is too simplistic to read 2026 as just "smaller Paz." If the second large customer stays around its historical scale, and Paz itself drops to about 30% of forecast total volume, then the gap will not close automatically through the existing customer base. It requires active construction of a wider domestic book, or it will be pushed into exports.
Backlog Fell, But A Lower Backlog Is Not The Same Thing As An Equal Drop In Sales
The 2026 order backlog opened at about $1.5 billion, versus about $2.2 billion for 2025. The company links that decline explicitly and mainly to the lower Paz quantities. That is material, but the right read is slightly more nuanced.
Backlog here is first a measure of opening contractual visibility, not a full-year sales forecast. The company states explicitly that backlog excludes LPG, the CAOL agreement, and exports. It also explains that domestic sales are mostly built on annual framework agreements that set price formulas, payment terms, security, and volumes, while still allowing some flexibility to update monthly and annual quantities.
So the drop from $2.2 billion to $1.5 billion does not necessarily mean that full-year revenue must fall by the same amount. It does mean something else, and that is more important for this continuation: 2026 starts with less contractual visibility in the domestic layer. If Ashdod fills the gap later in the year through exports or additional domestic orders, sales may still look acceptable. But the certainty and visibility of those sales will be weaker than what the company had at the start of 2025.
That is also why the company's short disclosure that there had been no material changes or cancellations in binding orders by the report date matters. It does not erase the weaker backlog. It does mean the problem right now is not enough signed volume, not an unraveling of already-signed demand.
Exports Can Replace A Barrel, But Not Necessarily Preserve The Same Economics
The company already says it has signed agreements to sell part of the Paz-related gap to other domestic customers and is working to sell the rest to domestic customers and exports. That is the encouraging side. Ashdod is not entering 2026 with a completely open hole.
But this is the main yellow flag in this continuation. The company also says that, at the report date, it cannot estimate the actual impact on 2026 results because that impact depends on refining margins, production levels, domestic sales volumes, and the operating and commercial costs associated with exporting fuel products. Put differently, even when the barrel is sold, not every replacement barrel carries the same margin and the same revenue quality.
The sharper point is that the company estimates future exports above 25% of total sales. That can sound like just another sales target. In reality, against only 15% export share in 2025, it signals a meaningful change in mix quality. If exports really move above one quarter of sales, Ashdod will move materially away from the unusually domestic-heavy mix it enjoyed in 2025.
That is where volume replacement and margin preservation diverge. In the domestic market, Ashdod works through annual framework agreements that structure price formulas, payment terms, security, and volumes. Exports, by contrast, are not even included in opening backlog, and the company explicitly says they come with operating and commercial costs. So anyone looking only at whether the company "filled the gap" may miss the more important economic question: through which channel was the gap filled.
What Stands Out In The 2026 Presentation
Slide 24 in the presentation frames 2026 through three relatively constructive lenses: a strong starting point after a successful regeneration process, active management of challenges, and a complex but supportive environment because refining margins remain strong. That framing is reasonable, and it also tells the reader something important.
The operating debate is no longer the heart of the story. The presentation speaks about high throughput, operating efficiency, and ongoing business development. In other words, even in management's own framing, the center of gravity has already shifted from "is the refinery back" to "how do we manage the year from here." This follow-up places the real weight of that management challenge somewhere more specific: rebuilding the domestic customer layer, controlling how much volume is pushed into exports, and proving that the new barrels arrive with comparable contractual quality and margin quality.
Conclusion
The 2026 Paz agreement is not only a story of a weaker anchor customer. It is a story of moving from a relatively favorable 2025 sales structure into a year that opens with weaker contractual visibility, a narrower contractual basket with Paz, and greater dependence on how much of the gap can be closed through domestic customers versus exports.
So the real 2026 test is not only whether total sales volume is preserved. The test is whether Ashdod can replace a Paz barrel with another barrel without also replacing the commercialization quality, the certainty layer, and the margin that remains after export-related costs. If it can, lower Paz exposure will eventually look like a healthy diversification step. If it cannot, the result will look like volume that stayed on paper but was diluted on the way to the bottom line.
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