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Released October 24, 2014 | PERTH, AUSTRALIA
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Researched by Industrial Info Resources Australia (Perth, Australia)--The closure of another Australian refinery has raised questions about the future of Australia's Petroleum Refining Industry. The closure of Caltex Australia's (ASX:CTX) (Sydney, New South Wales) Kurnell refinery will leave nearly 300 people without jobs, since the company has indicated that only 45 workers will be required to operate the fuel terminal.
View Plant Profile - 1035355
Caltex made its intentions clear in 2012, when the company unveiled plans to commence a two-year, $270 million project to convert the Kurnell refinery into a refined fuel storage terminal.
Caltex Australia's decision follows the trend of other major oil companies that have closed or are planning to close their Australian refineries. Shell Australia's (Tarniet, Victoria) Clyde Refinery was shut down in 2012. The site was purchased by Viva Energy (Hawthorn, Victoria) in 2014 and is now being used as a storage terminal. BP Australia (Docklands, Victoria) also confirmed that it will close its 102,000-barrel-per-day (BBL/d) Bulwer Island Refinery in Queensland in 2015. Shell Australia is part of Royal Dutch Shell plc (NYSE:RDS.A) (Hague, Netherlands), and BP Australia is part of BP plc (NYSE:BP) (London, England).
View Plant Profile - 3003586 1036250
The closure of Kurnell leaves Australia with five operational refineries. These refineries, which are being tracked by Industrial Info, are projected to spend US$571.26 million on 17 maintenance and capital projects over the next year, ending in October 2015. Industrial Info's research also has revealed that maintenance projects make up 13 of the 17 projects. This figure indicates that Australian refiners are reducing expenditures on new build, expansion and revamp projects.
Australian refiners are finding it difficult to compete with cheaper, larger refineries in neighbouring Asian countries like Singapore and Malaysia. The refiners' situation has been worsened by declining oil prices, which have been caused by growing uncertainty about future oil demand in Europe and Asia.
The challenge faced by Australian refiners was confirmed in a press statement released by Caltex Australia in May 2012. The statement declared: "The Kurnell refinery is relatively small and disadvantaged when compared to the modern, larger, more efficient refineries in Asia. This disadvantage is made worse by the impact of the ongoing strength of the Australian dollar, lower refining margins, and increasing costs in the refining business."
Australia's refining capacity declined 28% following the closures of the Clyde and Kurnell refineries. Domestic refiners now produce just more than 50% of the fuel consumed in Australia, with the remainder being imported. Australia's increasing reliance on fuel imports has raised public concerns about the impacts of declining domestic refinery capacity on Australia's economic and energy security.
Some industry groups, like the Australian Institute of Petroleum (AIP), have rejected the negative views on Australia's energy security. According to John Tilley, executive director of AIP, changes in Australia's domestic refining capacity will not prevent the country from meeting its domestic petroleum requirements. Tilley claims that Australia's reliable, mature and diversified international petroleum supply chains will continue to provide it with ongoing economic and energy security.
There has been growing public concern that the recent refinery closures will trigger an increase in domestic Australian fuel prices. These concerns have been dismissed by the AIP and the federal government, whose 2013 Energy Security White Paper claims that the recent refinery closures will not lead to negative price outcomes for Australian consumers.
This view was echoed by the Australian Competition and Consumer Commission (ACCC). The ACCC has indicated that import parity pricing in Australia will prevent the retail price for fuel from being impacted by the recent refinery closures. The Import Parity Price (IPP) is the price at which a fuel can be purchased by Australian distributors on the international market, freighted to a specific port in Australia and landed in a terminal. The problem with the ACCC's argument is that domestic fuel prices in Australia will become more vulnerable to international price fluctuations as the country imports more fuel.
It is difficult to predict whether maintaining a strong ability to refine crude will be a necessary part of Australia's long-term energy security. It is also unclear how long Australia's existing refineries will be able to cope with rising domestic energy demands. Industrial Info has revealed that Australia's current refineries are reluctant to invest in future capital projects. This indicates that Australia's refiners are continuing to consider the long-term viability of their Australian operations.
Most experts agree that the best way for Australia to safeguard its energy security is to maintain access to well-functioning petroleum markets and supply chains that are highly resilient.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, 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.
View Plant Profile - 1035355
Caltex made its intentions clear in 2012, when the company unveiled plans to commence a two-year, $270 million project to convert the Kurnell refinery into a refined fuel storage terminal.
Caltex Australia's decision follows the trend of other major oil companies that have closed or are planning to close their Australian refineries. Shell Australia's (Tarniet, Victoria) Clyde Refinery was shut down in 2012. The site was purchased by Viva Energy (Hawthorn, Victoria) in 2014 and is now being used as a storage terminal. BP Australia (Docklands, Victoria) also confirmed that it will close its 102,000-barrel-per-day (BBL/d) Bulwer Island Refinery in Queensland in 2015. Shell Australia is part of Royal Dutch Shell plc (NYSE:RDS.A) (Hague, Netherlands), and BP Australia is part of BP plc (NYSE:BP) (London, England).
View Plant Profile - 3003586 1036250
The closure of Kurnell leaves Australia with five operational refineries. These refineries, which are being tracked by Industrial Info, are projected to spend US$571.26 million on 17 maintenance and capital projects over the next year, ending in October 2015. Industrial Info's research also has revealed that maintenance projects make up 13 of the 17 projects. This figure indicates that Australian refiners are reducing expenditures on new build, expansion and revamp projects.
Australian refiners are finding it difficult to compete with cheaper, larger refineries in neighbouring Asian countries like Singapore and Malaysia. The refiners' situation has been worsened by declining oil prices, which have been caused by growing uncertainty about future oil demand in Europe and Asia.
The challenge faced by Australian refiners was confirmed in a press statement released by Caltex Australia in May 2012. The statement declared: "The Kurnell refinery is relatively small and disadvantaged when compared to the modern, larger, more efficient refineries in Asia. This disadvantage is made worse by the impact of the ongoing strength of the Australian dollar, lower refining margins, and increasing costs in the refining business."
Australia's refining capacity declined 28% following the closures of the Clyde and Kurnell refineries. Domestic refiners now produce just more than 50% of the fuel consumed in Australia, with the remainder being imported. Australia's increasing reliance on fuel imports has raised public concerns about the impacts of declining domestic refinery capacity on Australia's economic and energy security.
Some industry groups, like the Australian Institute of Petroleum (AIP), have rejected the negative views on Australia's energy security. According to John Tilley, executive director of AIP, changes in Australia's domestic refining capacity will not prevent the country from meeting its domestic petroleum requirements. Tilley claims that Australia's reliable, mature and diversified international petroleum supply chains will continue to provide it with ongoing economic and energy security.
There has been growing public concern that the recent refinery closures will trigger an increase in domestic Australian fuel prices. These concerns have been dismissed by the AIP and the federal government, whose 2013 Energy Security White Paper claims that the recent refinery closures will not lead to negative price outcomes for Australian consumers.
This view was echoed by the Australian Competition and Consumer Commission (ACCC). The ACCC has indicated that import parity pricing in Australia will prevent the retail price for fuel from being impacted by the recent refinery closures. The Import Parity Price (IPP) is the price at which a fuel can be purchased by Australian distributors on the international market, freighted to a specific port in Australia and landed in a terminal. The problem with the ACCC's argument is that domestic fuel prices in Australia will become more vulnerable to international price fluctuations as the country imports more fuel.
It is difficult to predict whether maintaining a strong ability to refine crude will be a necessary part of Australia's long-term energy security. It is also unclear how long Australia's existing refineries will be able to cope with rising domestic energy demands. Industrial Info has revealed that Australia's current refineries are reluctant to invest in future capital projects. This indicates that Australia's refiners are continuing to consider the long-term viability of their Australian operations.
Most experts agree that the best way for Australia to safeguard its energy security is to maintain access to well-functioning petroleum markets and supply chains that are highly resilient.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, 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.
