Geelong oil refinery ‘energy hub’ plan gains global backers

The owner of the loss-making Geelong oil refinery says the backing of international energy giants will help accelerate plans to add a shipping terminal for imports of super-chilled liquefied natural gas and support ongoing employment at the site.

Viva Energy, which is considering shutting down the 65-year-old refinery after losses blew out to nearly $80 million, on Monday said it had entered into agreements with two consortia including Japan’s Mitsui, France’s Engie and trading giant Vitol, to begin importing cargoes of liquefied natural gas (LNG) at the site from as early as 2024 and to assess other expansion opportunities to turn it into an “energy hub”.

Chief executive Scott Wyatt said forecasts of a natural gas shortfall in south-eastern Australia from 2023-24 and the support of Viva’s new partners, which would sign up to purchase LNG from the terminal as well as bring operational expertise from similar projects globally, had put Viva in a “very strong position” to push the project forward successfully.

“It will add diversity of earnings and job opportunities for the existing activity at Geelong … and will ultimately improve the viability of the whole site,” he told The Age and The Sydney Morning Herald.

“We have a great deal of confidence to be able to move this forward successfully. With these partners, we expect to move this forward with pace in the coming year.”

Diversifying the Geelong refinery’s 235-hectare site to house new technologies – which Viva said may also include the construction of a solar farm, hydrogen manufacturing and gas-fired power generation – could help support ongoing employment for the refinery’s 700 workers, whose jobs are under a cloud as the coronavirus crisis pushes the oil refinery to breaking point.

“I am heartened by Viva’s announcement,” said Ben Davis, Victorian secretary of the Australian Workers Union. “This is another piece of the puzzle falling into place to secure the future of the refinery.”

However, the fate of the refinery remains uncertain. The lockdown-led crash in petrol, diesel and jet fuel demand has gutted its profit margins and forced a review of the refining division to assess options including permanently shutting down the facility. Mr Wyatt said the review would be completed by the end of the year.

In a sign of the severity of the threat facing refiners, BP has announced the closure of the country’s largest oil refinery, the Kwinana refinery in Perth, leaving Australia with three oil refineries remaining and a greater reliance on imported transport fuels. Mr Wyatt on Monday expressed confidence in the progress of talks with Federal Energy Minister Angus Taylor over support measures to prevent further refinery closures including a 1.15¢-a-litre payment for locally made fuel, worth more than $2.3 billion over 10 years.

Viva’s plan to commence imports of LNG – a fuel widely used in power, heating and manufacturing – from elsewhere in Australia and overseas is the second such proposal in Victoria, as power giant AGL fights to gain approval for a environmentally contentious development in Western Port in the face of a strong community backlash.

LNG imports are being increasingly explored as part of the solution to bring down stubbornly high east-coast gas prices, which have been piling enormous pressure on manufacturing plants that rely on it. The Australian Energy Market Operator has forecast a supply shortfall to hit Victoria and NSW as early as 2023.

“We want to have this project ready to be a capable supplier into that market as domestic production in the southern states declines,” Mr Wyatt said on Monday. “Based on the progress we’ve made and the work we still need to do, that’s very achievable.”

Viva told investors on Monday it had entered into agreements with two separate consortia for the project, one involving a partnership between Engie and Mitsui, and the other with Vitol and VTTI. Viva anticipated a final investment decision could be reached as early as 2022.

Augustin Honorat, Engie’s Australia and New Zealand chief executive, said partnerships were an important part of accelerating the transition to a carbon-neutral economy. “This project has the potential to leverage Engie and Mitsui’s global experience to help develop the Geelong energy hub and provide residential and business customers with cleaner and more affordable energy supplied via efficient infrastructure,” he said.

Extracted from The Sydney Morning Herald

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