Page 10 - AsianOil Week 06 2021

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Australia’s downstream

sector in a spiral

ExxonMobil’s decision to close its Altona refinery suggests the
end could be nigh for Australia’s old and inefficient refineries.

COMMENTARY US super-major ExxonMobil announced plans The refinery, Australia’s smallest with just
this week to permanently shutter one of Aus- 90,000 barrels per day (bpd) of capacity, will
tralia’s three remaining refineries, in a move remain in operation while the facility is con-
WHAT: that raises serious questions about the coun- verted into an import terminal.
ExxonMobil has closed try’s energy security. ExxonMobil’s decision to The domestic downstream has taken a beat-
its 90,000 bpd Altona close the Altona refinery in the southern state ing over the past year, with the coronavirus
refinery. of Victoria comes just a few months after UK (COVID-19) pandemic triggering international
super-major BP revealed similar plans for its and domestic border closures as well as ad hoc
WHY: Kwinana refinery in Western Australia. lockdowns by state governments.
The super-major said Both companies have said they will convert But while it would be easy to panic about the
the facility was no longer their facilities into oil product import terminals, Australian refining sector, the reality is that the
economically viable. raising concerns about being exposed to regional global economic downturn only sped up the
supply chain volatility. Australia already falls inevitable. Both Asia and the Middle East have
WHAT NEXT: short of its international oil reserve obligations seen a number of export-focused, mega-refin-
More closures are likely and this situation may worsen with two more eries open up in the last few years, putting the
despite government refineries set to be retired and questions linger- refining margins of smaller, older and less effi-
efforts. ing over the continued viability of the country’s cient plants under immense pressure.
last two refineries. Australian Prime Minister Scott Morrison
tried to throw the sector a lifeline in September
Economic viability 2020, with promises of a fuel security package
ExxonMobil said on February 10 that it no worth more than AUD2.5bn ($1.94bn) as part of
longer considered the Altona refinery to be eco- the financial year 2021-2022 budget. The pack-
nomically viable. The super-major said it had age will include a refinery production payment
reached the decision to convert the facility after programme, offering refiners a direct payment
an extensive operational review. of AUD0.0115 ($0.0089) per litre for domestic
ExxonMobil said: “The review considered the fuel production.
competitive supply of products into Australia, The plans did not come in time for BP, how-
declining domestic crude oil production, future ever, which announced in October 2020 that it
capital investments and the impacts of these fac- intended to close the Kwinana refinery and con-
tors on operating earnings.” vert it into a fuel import terminal.

P10 www. NEWSBASE .com Week 06 11•February•2021