(EnergyAsia, December 19 2011, Monday) — Australia’s largest downstream oil company may follow the lead of its rivals to scrap its loss-making refinery operations following another warning of a large full-year profit downgrade.
Caltex, which has already begun reviewing its refining business, expects its 2011 after-tax operating profit including significant items to fall to between A$180 million and $200 million compared with last year’s A$302 million on account of the strong Australian dollar and weak refining margins.
The significant items include the costs associated with the decisions to close the company’s fluidised catalytic cracking unit (FCCU) and propane de-asphalting unit (PDU) at its Kurnell refinery in Sydney (announced in October 2011), redundancies associated with the decision to outsource most of its in-house maintenance activities at the Kurnell and Lytton refineries in Brisbane (announced in August 2011), and other consulting costs.
In a statement, Caltex, which could end up focusing on fuel marketing and retailing, said:
“The deteriorating external conditions continue to present challenges and pressure refining earnings. Despite these headwinds, the refining team has focused on driving efficiencies and maintaining safe and reliable operations. The detailed work to review the role of Caltex’s refineries in supplying customers is ongoing. A broad range of options is being explored and the complex nature of this work means that a decision is still a number of months away.
“Marketing continues to focus on its core strategy of driving sales of premium fuels, diesel, jet and lubricants, with record volumes achieved to date for each of these products. Based on this volume growth and continued strength in convenience store earnings, the marketing team expects to achieve a record result for 2011.”
Like Shell and Mobil, Caltex has found itself increasingly unable to compete against the larger and more modern refineries of Asia.