(EnergyAsia, August 29 2012, Wednesday) — Caltex, Australia’s leading downstream oil company, is expanding its fuel marketing and distribution activities as its refining operations shrink with the planned closure of the Kurnell plant in Sydney in 2014.
In reporting its latest half-year result, the company revealed plans to invest as much as A$$450 million in marketing activities and infrastructure this year, compared with A$242 million in 2011 (US$1=A$0.96).
Earlier, Caltex had announced it will invest A$650 million to convert the 57-year-old 135,000 refinery into a terminal to import and store fuels, but will continue to operate a smaller 109,000 b/d refinery in Lytton in Brisbane.
The decision to shut down Kurnell, which accounts for a fifth of Australia’s refining capacity, has proved deeply unpopular with politicians and consumers who said the company is endangering the country’s energy security while unions are angered by the loss of between 330 and 600 jobs.
The 50%-owned subsidiary of US major Chevron said it made the right decision despite its refining business reporting a A$2 million profit in the first half of 2012 after a recent run of red ink including last year’s loss of more than A$200 million.
The country’s largest blue-collar union has accused the company of “manipulating its finances in order to close its Sydney oil refinery”, according to a Sky News report.
It quoted Australian Workers’ Union (AWU) boss Paul Howes calling Caltex “cynical manipulators and poor corporate citizens” in light of the strong profit figure and better financial performance of the refining division.
Defending company’s decision, Caltex chief executive Julian Segal said it took the long-term view that the ageing plant at Kurnell could not compete against the existing and up-coming massive state-owned refineries.
“We made the Kurnell decision on the basis of the long-term outlook for refining, not short-term results. Caltex’s refineries are relatively small and, in their current configuration, remain disadvantaged when compared to the modern, larger scale, more efficient refineries in the Asia region against which we compete,” he said.
“Restructuring the supply chain over the next two years, and providing the funding flexibility to support growth in our marketing operations, will reduce future earnings volatility and provide a solid platform going forward.”
For the six months to June 30, Caltex said its net after-tax profit fell to A$167 million compared with A$270 million for the same period last year.
It attributed the slump to crude and product inventory losses of A$30 million for 2012 compared with a gain of A$157 million for the same period last year.