Caltex Australia to close 124,500 bpd Kurnell refinery
Oil refiner Caltex Australia announced on Thursday it will close its loss-making 124,500 barrel-per-day Kurnell oil refinery in Sydney after a year-long review, converting it into an import terminal and cutting more than 600 jobs.
Australian refiners have been grappling with ageing equipment, cheaper imports, high costs and a strong Australian dollar, leading to closures, restructurings and reviews of operations.
'Caltex's refineries are relatively small and, in their current configuration, are disadvantaged when compared to the modern, larger scale, more efficient refineries in the Asian region against which we compete,' Caltex Chief Executive Julian Segal said in a statement.
Caltex said it had agreed a long-term supply deal with 50 percent shareholder Chevron for transport fuels at 'market-based prices'.
Segal did not specify where the fuel would be imported from but said not having a refinery in the region would not impact local fuel prices.
'There is a reliable supply in the region -- in Singapore, in Korea, India,' he told a news conference.
Kurnell has around 430 employees and 300 contractors. There would be less than 100 employees on site once the plant is closed in the second half of 2014, Caltex said.
Costs related to closing the plant and converting it into an import terminal will come to around A$680 million ($698 million), the company said, announcing it will cut back on dividend payments while the closure and conversion takes place.
Combined production at the 57-year-old Kurnell refinery and the company's Lytton refinery in Brisbane is made up of about 50 percent petrol, 30 percent diesel and 15 percent jet fuel.
Caltex said it was working to improve the operational and financial performance of Lytton, which had better hardware than Kurnell. While there were no guarantees about Lytton's long-term future, Caltex was confident it could better meet market requirements, Segal said.
Caltex said its refinery business lost A$60 million in the March quarter and A$208 million in the past year. It wrote down the value of its refinery assets by A$1.5 billion earlier this year.
Caltex also said it was cutting its dividend policy, from a current payout ratio of 40-60 percent to 20-40 percent, and was looking at raising capital by issuing hybrid securities to improve its balance sheet.
Shares in Caltex rose 1.5 percent in a slightly firmer broader market.
Australia consumed 52 billion litres of petrol, diesel and jet fuel in the year to June 30, 2011, with net imports accounting for around 14 billion litres.
Source: XE News