The owner of the Geelong oil refinery is weighing whether to proceed as planned with a $100 million investment in its future as the coronavirus outbreak wipes out fuel demand and guts refining profits.
Viva Energy, which owns the 65-year-old refinery and thousands of Australia’s Shell-branded petrol stations, said on Thursday it would make deep cuts to its investment budget for the year ahead and reconsider its major maintenance spending at the plant. The works were mapped out earlier this year in a program to prolong the operating life of one of the country’s four remaining oil refineries and one of Geelong’s “last remaining industrial businesses”.
Viva said its decision to reconsider the plans was driven by the need to “preserve cashflow” as well as ensure compliance with social-distancing measures to minimise the risk of an infection outbreak. The program would have involved temporarily bringing another 1000 workers to the site in addition to the 700 typically employed there.
“We will also closely monitor the longer-term refining margin outlook which continues to evolve,” Viva said, adding it would complete its review and update the market by the end of June.
Viva’s Geelong refinery, which can process up to 120,000 barrels a day, is the second largest among the country’s four remaining refineries and supplies about 10 per cent of Australia’s liquid fuel needs. Margins at the site have crashed to $US2.70 a barrel in the March quarter, down from $US4.90 a year earlier.
The nation’s other refiners have also been hit hard by global efforts to arrest the spread of the deadly pandemic as borders close, airlines slash flights and passengers cancel travel plans. The outbreak has slashed petrol demand by half and jet fuel demand by 70 per cent.
Viva’s announcement comes after rival fuel giant Caltex said on Monday it would extend a shutdown of its Brisbane oil refinery, where margins have similarly collapsed in recent months.
Energy Minister Angus Taylor said the government was working with the refiners to ensure no disruption to Australia’s fuel supplies amid the coronavirus emergency.
“The Australian government recognises that this is a difficult time for oil refineries worldwide, including refineries in Australia,” he said. “Australia has a highly reliable fuel supply and these decisions from refineries will not hinder our immediate fuel security.”
With fuel demand hit by the coronavirus, Mr Taylor said Australian motorists could be assured there was a good supply of fuel products in the market. “There is no need to panic buy,” he said.
Australia has become increasingly reliant on imported fuel over the past decade, with three of the nation’s seven domestic refineries closing down and domestic production of liquid fuels declining sharply. However, the government and industry figures are confident in the reliability of Australia’s fuel supply due to the fact Australia imports fuel from more than 70 nations, with no single country providing more than 20 per cent of petroleum imports.
Extracted from Brisbane Times