ExxonMobil Bucks Trend by Investing in Australian Refinery

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Researched by Industrial Info Resources Australia (Perth, Australia)--ExxonMobil Australia (Melbourne, Victoria), a subsidiary of Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), is bucking the trend in Australian refining by injecting a large amount of capital into its Altona Refinery in Victoria. While most Australian refineries are cutting back on spending in order to contain rising debt, which is caused by high operating costs and competition from Asia, ExxonMobil is hoping that increased investment will contribute to increased productivity and profits at Altona.

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ExxonMobil's 112,000-barrel-per-day (BBL/d) Altona Refinery is one of the smallest refineries in the Asia Pacific. Despite its size, ExxonMobil has invested nearly $300 million on major capital and maintenance projects at the refinery during the past five years. Some of the major projects have included a new benzene reduction plant, new cooling towers and a multistory administration block. Industrial Info's research shows that ExxonMobil plans a major, plant-wide shutdown for maintenance and upgrade work in October 2015.

ExxonMobil's behavior contrasts with the conservative mood of other Australian refiners like Shell Australia (Perth, Australia), which is part of Royal Dutch Shell plc (NYSE:RDSA) (The Hague, Netherlands), and Caltex Australia (ASX:CTX) (Sydney, Australia), who have tightened up spending in recent years. Companies like Shell and Caltex are finding it increasingly difficult to compete with larger and more cheaply run refineries in Asia. The recent closure of Caltex's Kurnell and Shell's Clyde refineries in New South Wales have illustrated the economic challenges facing Australian refiners.

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ExxonMobil's attitude is surprising, considering the difficult nature of Australian refining at the present time. Even more surprising is ExxonMobil's ambition to keep investing heavily in Altona in the future. This was revealed when Andrew Warrell, ExxonMobil's Refining Manager for Australia and New Zealand, said, "We [ExxonMobil] expect to keep investing [in Altona] at that sort of clip of about $300 million every five years, maybe even a little bit more."

Warrell's statement is good news for Australia, considering that many in the country are concerned by Australia's increasing reliance of foreign fuel imports. It is now estimated that 90% of Australia's fuel is imported from overseas. It is also estimated that Australia only has enough stored fuel to last 12 days. ExxonMobil's long-term commitment to Altona is important for Australia and will contribute to the ongoing protection of the countries' energy security.

ExxonMobil profits from Altona largely because the refinery is located close to its major crude oil supply in the Bass Strait, which supplies nearly 50% of Altona's crude. The proximity of Altona to the Bass Strait has given ExxonMobil a cost advantage over local refiners Shell and BP plc (NYSE:BP) (London, England), which are forced to spend more money transporting crude from around Australia and the Asia Pacific to their east coast refineries.

According to Warrell, another reason why ExxonMobil has been making profits at Altona is because the composition of the oil used in Altona's 28,500-BBL/d fluidized catalytic cracker unit is different from that used by other Australian refineries. All refineries run on different types of oil. The difference with Altona is that the light, sweet crude that the refinery uses has become much cheaper as a result of the extra supply created by the shale boom in the U.S.

For more information, visit Industrial Info's Oil & Gas Production Database.

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