THE boss of the Geelong refinery predicts it will take two years to return to pre-pandemic production as international travel bans severely limit jet fuel production.
Petrol production has rebounded at the Viva refinery since last year’s COVID-19 lockdowns, and won’t be impacted by Victoria’s snap lock down, while diesel production remains strong due to industry demand.
Viva Energy chief executive Scott Wyatt is optimistic about the refinery’s future as he looks to diversify it into LNG, solar energy and hydrogen, and access as much as possible of the federal government’s growing $283 million rescue package for the beleaguered sector.
But Mr Wyatt is cautious due to an excess of fuel production worldwide which, he said, would put significant long term pressure on refining margins.
“I will always approach this from doing everything we can to secure a longer term future for the refinery because I think it’s not just important for our business but the state and the country,” Mr Wyatt said.
“If we can progress the projects … which … start to build our future in renewables alongside our traditional business then I think we have a great future.
“I do feel optimistic with where we’re at with the federal government in the context of refining. There is a process for an interim (payment) and a long term (payment for fuel production).
“We’ve actually had a pretty good year outside the refining business. Our retail business has performed very well. Outside of aviation, our commercial businesses have performed well.”
By July, Viva is due to receive $30 million from the federal government for producing about 3 billion litres of transport fuel.
That amount is expected to rise because of the announcement last week the Altona refinery would shut.
Viva produces half of the state’s transport fuel from Geelong, and Mr Wyatt said that had potential to increase following the Altona announcement.
“It probably means we’ve got a bigger market to supply our product into locally.”
And based on 2019 maximum production levels, the Geelong refinery could be the nation’s largest when the BP refinery in Western Australia closes.
Data from the Australian Institute of Petroleum puts the Viva refinery’s maximum capacity at 7470 megalitres per year.
Mr Wyatt said Viva always tried to run the Geelong refinery “as hard” as it could.
“We’re incentivised to do that because there are a lot of fix costs in the plant.
“Since we came out of restrictions late last year the market demands have returned back to normal levels (with the exception of jet fuel) so we’ve been able to run the refinery at full production. And that’s what we’ve been doing.
“We don’t have capacity to run any harder, we are running as hard as we can.”
My Wyatt said COVID dropped global demand for oil products by about 20 per cent but that had recovered.
“That will continue … as activity (around the world) returns to normal. But that will take a couple of years to flow through. You can see with aviation, no one is expecting any (significant) amount of air travel this year, and maybe it will be slow next year as well.
“We’ve got too much refining capacity around the world so that puts pressure on margins.
“Refineries want to run flat out but they have got to have somewhere to sell.”
Viva is due to release financial results on February 24.
Extracted from Geelong Advertiser