(EnergyAsia, July 30 2012, Monday) — Australia will lose a fifth of its 660,000 b/d oil refining capacity when Caltex shuts down its 135,000 b/d plant in Kurnell in Sydney city in the second half of 2014.
Following a review of its domestic refining operations, Caltex said it will invest A$250 million to convert the 57-year-old plant to a fuel import and storage terminal with the loss of 330 jobs but will continue to operate the smaller 109,000 b/d refinery in Lytton in Brisbane. (US$1=A$0.97).
Shell will close its 79,000 b/d Clyde refinery in Sydney by September, leaving Australia with five refineries as the industry is increasingly unable to compete against Asia’s large modern refineries.
Australia’s other remaining four refineries include the ExxonMobil plant at Altona and Shell’s Geelong plant, both in Melbourne, and BP’s plants in Kwinana in Perth and Bulmer Island in Brisbane.
“Caltex’s refineries are relatively small and, in their current configuration, are disadvantaged when compared to the modern, larger scale, more efficient refineries in the Asian region against which we compete,” Caltex CEO and managing director Julian Segal said in a statement.
“This, combined with the challenging business environment including the strength of the Australian dollar, increased operating costs and a lower refiner margin has meant that Caltex’s refineries have been generating significant losses which are expected to continue into the future.”
To make up from the loss of domestic production, the ASX-listed company said it has entered into a long-term agreement to procure gasoline, diesel and jet fuel from 50% shareholder US major Chevron.
In February, Caltex Australia reported a A$714 million net loss for the year to December 31 due largely to losses from its refinery operations.
In response to Caltex’s latest announcement, Energy and Resources Minister Martin Ferguson said Kurnell’s closure will not jeopardise the nation’s energy security as Australia “already imports large amounts of crude oil and finished petroleum products. This decision will see imported supplies of crude oil being replaced by imported refined products.”
Ferguson said Australian plants are small compared to the “mega refineries” in Asia, with the Jamnagar refinery in India having a larger total capacity than Australia’s current six combined.