(EnergyAsia, February 17 2012, Friday) — Battered by Asian competition and a strong local currency, Australia’s largest downstream oil company said it could decide to shut down its two refineries later this year after writing down their combined value by A$1.5 billion. (US$1=A$0.94).

Caltex Australia Ltd, half-owned by US major Chevron Corp, said the fate of its two plants which accounts for more than a third of the country’s total capacity of 660,000 b/d now rests on the outcome of an operational review due in six months. The outlook is grim as Australia’s small ageing refineries can no longer compete against the modern export-oriented plants in Asia and the Middle East which vary between 400,000 and 600,000 b/d in size.

According to the Department of Resources, Energy and Tourism, the 131,000 b/d Kurnell plant in Sydney and the 109,000 b/d Lytton plant in Brisbane are the country’s second and third largest refineries among seven. The Caltex refineries together employ about 800 people and another 650 contractors.

Royal Dutch Shell is converting its 90,000 b/d Clyde refinery in Sydney into a fuel import terminal, while ExxonMobil Corp could be next to shut down its 80,000 b/d Altona refinery in Melbourne.

The remaining three belong to Shell (110,000 b/d in Geelong, Melbourne) and BP (140,000 b/d Kwinana near Perth and 90,000 b/d Brisbane).

In a statement, Caltex said that despite efforts to improve operations, its small refineries in their current configuration are unable to compete against Asia’s modern, larger scale and more efficient refineries.

“This disadvantage has been exacerbated by the impact of the ongoing strength of the Australian dollar, lower refiner margins and increasing costs on the refining business,” it said.
The company’s managing director and CEO, Julian Segal, said the review is aimed at optimising shareholder value that will include evaluating all options including closing down the refineries “if we are able to import product at a competitive price.”
He said Caltex, which has over a third of the country’s transport fuels, will honour its commitment to maintain reliable supply to customers whatever the outcome of the review.