By ROSS KELLY
SYDNEY -- Australia's biggest city will be without an oil refinery from the second half of
2014 after Caltex Australia on Thursday said it will close its
Kurnell facility in Sydney and convert it to a fuel import
Australia's aging refineries are small compared to new facilities being built in China and
India, making it tough for local
operators to compete on costs.
An oversupply of fuel into the Asia Pacific market has also
put pressure on regional refiner margins, making life tougher
for companies like Caltex, which is 50%-owned by Chevron.
The closure of Kurnell, involving the loss of 330 jobs, will
bring the number of refineries operating in Australia down to
five from seven at the start of this year as Royal Dutch Shell
is also due to close its Clyde refinery in Sydney next month.
Kurnell's nameplate capacity is 135,000 bpd, according to
Caltex's most recent annual report.
"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 Julian Segal said
in a statement.
Even so, Caltex said it will continue to operate its other
refinery, Lytton in Brisbane, with a focus on operational
Australia's remaining four refineries are the Altona and
Geelong facilities in Melbourne owned by
ExxonMobil and Shell respectively; and BPs Kwinana and
Bulmer Island refineries in Perth and Brisbane.
Martin Ferguson, Australia's resources and energy minister,
said the latest closure won't jeopardize Australia's energy
security because the country already imports large amounts of
crude and oil 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.
To ensure it has a reliable supply of refined products to
sell through its marketing division, Caltex said it has an
agreement with Chevron for the supply of transport fuels into
Kurnell's closure will come at a financial cost for the
company, which now expects to make provisions in 2012 of about
450 million Australian dollars ($463.6 million) to cover
employment benefits, dismantling and remediation expenses.
It will also invest about A$250 million converting the
Kurnell operation into an import terminal.
Dow Jones Newswires