Ampol warns of refinery closure

AMPOL has flagged the potential closure of its sole Australian refinery in the face of mounting losses from the struggling plant.

The fuel supplier, formerly known as Caltex Australia, said yesterday that the refinery had built up losses of $141 min the first nine months of the year.

It has launched a formal review into the refinery, at Lytton in Brisbane’s east, that is expected to conclude in the second quarter next year.

With Viva Energy also considering the future of its Geelong refinery, it means Australia could soon have just two refineries, ExxonMobil’s refinery at Altona, in Melbourne, and BP’s at Kwinana, in Perth.

As recently as 2009, Australia had eight refineries and at least one in every mainland state. The remaining plants now produce less than half of the country’s fuel needs, with most imported from overseas.

Ampol’s review of Lytton comes after international oil prices tumbled this year and refinery margins slumped, and the pandemic sent traffic levels in Australia tumbling.

In a statement to the Australian Securities Exchange yesterday, Ampol said that in the three months to September, Lytton had lost $82m before interest and tax.

That figure is on a replacement-cost basis, which ac-counts for fuel on hand based on what it would cost to replace, rather than its actual — historical—cost.

The loss in the past quarter included costs linked to a shutdown for maintenance.

Ampol said Lytton’s total output for 2020 was expected to tumble more than 40 per cent to 3.4bn litres of fuel.

The company had flagged an ongoing review of Lytton’s future at its first-half results announcement in August

Ampol chief Matt Halliday said a closure of the refinery was not a fore gone conclusion, but the facility faced“extreme” pressure from falling international refinery margins, despite an offer of assistance from the federal government.

“We’re putting some more formality around the process that we’re undertaking, and being clear around the options we will consider — including the closure and conversion to an import model, as well as different modes of operation ,” he said.

Mr Halliday said the “pressures that we’re facing are extreme”.