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Released August 16, 2012 | PERTH, AUSTRALIA
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Researched by Industrial Info Resources Australia (Perth, Australia)--Caltex Australia Limited (ASX:CTX) (Sydney, Australia) has decided that it can no longer sustain operations at the Kurnell Refinery, due to an inability to compete with larger, newer and more efficient refineries. The decision to permanently close the Kurnell Refinery and convert it to a large-scale import fuel terminal was announced on July 26, 2012, via an ASX announcement issued by Caltex Australia, detailing plans toward companywide supply chain restructuring.
The 124,500-barrel-per-day Kurnell Refinery began operations 57 years ago. For almost a decade, Kurnell has faced criticism that it is "showing its age," and for a year now, Caltex has carried out a thorough review of its Australian refining operations. In the past year, the refinery business lost Caltex $218.48 million. The review looked at Caltex's Lytton Refinery in Brisbane, along with maintaining the fuel import supply business. The Lytton Refinery will continue to operate as usual, and funds will be invested in projects for improved operating efficiency.
Caltex has signed a long-term supply and procurement agreement with Chevron Corporation (NYSE:CVX) (San Ramon, California) to begin two years from now, when the fuel import terminal is operational. The company ensured that it will provide a reliable and efficient supply of petrol, diesel and jet fuel under the agreement. Caltex currently supplies 30% of all transport fuels in Australia. As part of the supply chain restructuring, the company aims to become the market leader through investment supply chain management and marketing operations.
The total cost for the refinery closure and conversion project is expected to reach $714.24 million, of which about $262.59 million will cover the cost of tank modifications and refurbishments and $451.67 million will cover the cost of refinery closure (including employee redundancies), dismantlement, demolishment, and site remediation.
The Kurnell Refinery will cease refining operations in the second half of 2014. Planning for the closure has already begun, with work (demolishment, dismantlement) set to begin by the start of 2013, along with the bulk of the storage tank conversion work and the installation of additional piping. Caltex, with contractor Chicago Bridge & Iron (NYSE:CBI), will begin the work next week with the conversion of the first crude tank to make it ready for jet fuel storage. There are three contractors already enlisted to undertake the conversion work: Saunders International (ASX:SND) (Condell Park, Australia), Giovenco Industries (Ingleburn, Australia) and Chicago Bridge & Iron. These companies all have been preferred maintenance contractors for Caltex's tank maintenance. Giovenco Industries founded the company as a result of the regular contracting work received when five Giovenco brothers worked at the Kurnell Refinery from its inception.
The conversion work will take place over two phases, with the first phase to be complete in line with the refinery's closure. The second phase of construction will begin in 2014, with a focus on operational efficiency improvements. There are 110 storage tanks currently existing as part of the Kurnell Refinery; upon full completion of Phase II of the conversion project, 60 storage tanks will remain on site. Once operational, the fuel import terminal will require a workforce of less than 100 employees, constituting job losses for more than 600 of the current workforce, which includes about 300 full-time contractors and 430 Caltex employees.
In August of last year, Shell made the same decision in regards to its 100-year-old Clyde Refinery in Sydney. Restructuring of the refining and fuel import industry in Australia has become a necessity in remaining competitive in the global market. Asian-based refineries are more modern and larger in size, equating to better efficiencies in operations overall. The strong Australian dollar and increasing costs in the refining business are other factors that have led to refinery closures in the region.
For more information, see August 9, 2011, article - Shell to Convert Clyde Refinery in Sydney to Fuel Import Terminal.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The 124,500-barrel-per-day Kurnell Refinery began operations 57 years ago. For almost a decade, Kurnell has faced criticism that it is "showing its age," and for a year now, Caltex has carried out a thorough review of its Australian refining operations. In the past year, the refinery business lost Caltex $218.48 million. The review looked at Caltex's Lytton Refinery in Brisbane, along with maintaining the fuel import supply business. The Lytton Refinery will continue to operate as usual, and funds will be invested in projects for improved operating efficiency.
Caltex has signed a long-term supply and procurement agreement with Chevron Corporation (NYSE:CVX) (San Ramon, California) to begin two years from now, when the fuel import terminal is operational. The company ensured that it will provide a reliable and efficient supply of petrol, diesel and jet fuel under the agreement. Caltex currently supplies 30% of all transport fuels in Australia. As part of the supply chain restructuring, the company aims to become the market leader through investment supply chain management and marketing operations.
The total cost for the refinery closure and conversion project is expected to reach $714.24 million, of which about $262.59 million will cover the cost of tank modifications and refurbishments and $451.67 million will cover the cost of refinery closure (including employee redundancies), dismantlement, demolishment, and site remediation.
The Kurnell Refinery will cease refining operations in the second half of 2014. Planning for the closure has already begun, with work (demolishment, dismantlement) set to begin by the start of 2013, along with the bulk of the storage tank conversion work and the installation of additional piping. Caltex, with contractor Chicago Bridge & Iron (NYSE:CBI), will begin the work next week with the conversion of the first crude tank to make it ready for jet fuel storage. There are three contractors already enlisted to undertake the conversion work: Saunders International (ASX:SND) (Condell Park, Australia), Giovenco Industries (Ingleburn, Australia) and Chicago Bridge & Iron. These companies all have been preferred maintenance contractors for Caltex's tank maintenance. Giovenco Industries founded the company as a result of the regular contracting work received when five Giovenco brothers worked at the Kurnell Refinery from its inception.
The conversion work will take place over two phases, with the first phase to be complete in line with the refinery's closure. The second phase of construction will begin in 2014, with a focus on operational efficiency improvements. There are 110 storage tanks currently existing as part of the Kurnell Refinery; upon full completion of Phase II of the conversion project, 60 storage tanks will remain on site. Once operational, the fuel import terminal will require a workforce of less than 100 employees, constituting job losses for more than 600 of the current workforce, which includes about 300 full-time contractors and 430 Caltex employees.
In August of last year, Shell made the same decision in regards to its 100-year-old Clyde Refinery in Sydney. Restructuring of the refining and fuel import industry in Australia has become a necessity in remaining competitive in the global market. Asian-based refineries are more modern and larger in size, equating to better efficiencies in operations overall. The strong Australian dollar and increasing costs in the refining business are other factors that have led to refinery closures in the region.
For more information, see August 9, 2011, article - Shell to Convert Clyde Refinery in Sydney to Fuel Import Terminal.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
