Altona refinery closure to ripple across industry

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ExxonMobil said the refinery, the closure of which was first reported in The Australian Financial Review, ”is no longer considered economically viable” and will be converted into an import terminal. It is the smallest in the country, old and inefficient, but produces about half of Victoria’s petrol output.

Federal Energy Minister Angus Taylor described the decision as “extremely disappointing” and insisted the government’s $2.5 billion fuel security package will still improve the security of supply in petrol and diesel.

But that was rejected by opposition MPs and trade union leaders, who have now seen two refinery closure decisions within little more than four months despite the government’s belated efforts to support the sector. BP pulled the plug on its Kwinana refinery in Western Australia in late October and that plant is due to cease production this quarter.

“That fuel security plan is going so well …,” tweeted Madeleine King, the Labor member for Brand in Western Australia, which includes Kwinana.

“As this Liberal government dithers, hundreds of worker [sic] will get left behind.”

Crane operator Gavin Carney speaks after the announcement that the Altona fuel refinery will close. Jason South

Exxon Australia chairman Nathan Fay said the decision to convert the facility into an import terminal “is not a reflection” of the efforts of the Morrison government to offer support to the refining sector, which has been hammered by the impact of the COVID-19 pandemic.

But two of Australia’s four refiners have now rejected the rescue package and will close, while doubts still hang over Ampol’s Lytton plant in Brisbane, which is under review with a decision due this June half. Only Viva Energy has so far accepted the subsidy for its Geelong plant, agreeing in return to keeping it running for the duration of the measures.

Mr Walton said that while green groups would welcome the closure as a sign of the end to refined fuels, “the reality of this is another global multinational company has made a decision in a boardroom outside of Australia to maximise its profits by manufacturing elsewhere in the world and importing back into Australia”.

Altona state MP Jill Hennessy said the closure was “a devastating blow for local workers”.

It also further reduces Australia’s self-sufficiency in petrol and diesel production, increasing its reliance on imports to keep emergency services, defence personnel, miners and farmers fuelled.

“Australia’s fuel security, low for many years, is now almost zero,” tweeted Australian Industry Group policy adviser Tennant Reed. “If anything ever impedes the freedom of the seas, we are toast.”

The brutal decision by the US major, while not entirely unexpected, has rattled Victoria’s industrial heartland, stoking concerns that the closure will have a snowball effect across heavy manufacturers in the state.

An Exxon spokesman said the company would work with the petrochemical companies to minimise the impact on their operations. The refinery will remain running while the transition to the import terminal takes place to ensure reliable fuel supply for customers, he added.

Exxon said the decision to close Altona, which started production in 1949, took into account declining domestic oil production, the competitive supply of fuels into Australia, future capital investment “and the impact of these factors on operating earnings”.

All the refineries made heavy losses in 2020 after the COVID-19 pandemic hit fuel demand and depressed margins.

The Morrison government’s interim assistance package centres around a 1.15¢ per litre direct subsidy for domestic production of petrol, diesel and jet fuel. A more permanent subsidy to kick in on July 1 is still under discussion, with the industry pushing for at least 2¢ per litre. A competitive tender process is also underway for diesel storage contracts.

Mr Taylor said the fuel security package would “continue to progress and will enhance Australia’s long-term fuel security”. He noted the government also supported the sector through the JobKeeper program.

“The government will continue to work with the sector to support Australia’s refining capability and fuel security, which will support our farmers, miners and truckies into the future,” he said.