Page 9 - AsianOil Week 44 2020

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Australian downstream in a tailspin

With one refinery already set to close and another two on the chopping block, Australia
could see ithree quarters of its downstream shuttered in the not-too-distant future

COMMENTARY AUSTRALIA’S downstream sector is in trouble, announcing recently that it was reviewing the
with one refinery closure announced this past future viability of its Brisbane facility, there may
week and another facility on the verge of shut- be further refinery closures on the cards in the
WHAT: ting up shop. coming weeks and months.
BP has said it will convert UK super-major BP announced on October
its Kwinana refinery into 30 that it intended to end fuel production at its Adverse fundamentals
an oil product import Kwinana refinery in Western Australia and con- While the COVID-19 pandemic has routed
terminal. vert the plant into an oil product import termi- refinery balance sheets, the sector was in a
nal. Australian-listed Viva Energy, meanwhile, is fundamentally precious position long before
WHY: in talks with the Victorian government about the the virus landed on the country’s shores. Three
Australian refineries’ old future of its Geelong refinery. refineries – Clyde, Kurnell and Bulwer – had
age and small capacities Refinery operators are struggling to keep shut already up shop in the last decade, as rising
make them inefficient their facilities open in the wake of the corona- competition from export-focused mega-facili-
in an increasingly virus (COVID-19) pandemic, which has deci- ties in Asia and the Middle East changed the face
competitive regional mated demand for transportation fuels at home of the regional market.
market. and abroad. Australia’s four remaining refineries are out-
The Australian government has tried to offer dated, inefficient and small in scale. BP acknowl-
WHAT NEXT: a lifeline, with promises in September of a fuel edged the issue, noting that the decision had
Further closures seem security package worth more than AUD2.5bn not been driven by “local policy settings”, but
likely despite federal ($1.8bn). The package will include a refinery pro- rather by the “continued growth of large-scale,
government promises of duction payment programme that offers refiners export-oriented refineries throughout Asia and
assistance. a direct payment of AUD0.0115 ($0.0082) per the Middle East”.
litre for domestic fuel production. The UK super-major said regional oversup-
However, the federal government’s efforts to ply and sustained low refining margins meant
safeguard its downstream energy security are the 65-year old WA refinery was no longer eco-
too little, too late for BP and with Ampol also nomically viable. It added that after exploring

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