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Ernst & Young report Australia's refiners losing money


MELBOURNE�The latest report on Australia�s crude oil refining industry shows a continuing loss of income. Accounting firm Ernst & Young�s report on the finances for 1999 for the "big four" refining and marketing companies�Shell Australia Ltd., Caltex Australia Pty. Ltd., BP Australia Ltd. and Mobil Oil Australia Ltd.�shows that they lost a combined total of $61 million (Aus.) on their Australian refining operations.

Ernst & Young�s annual survey does not report individual figures. However, the companies reported a total profit on oil retailing and marketing operations of $282 million on an investment base of more than $10.68 billion in refining and marketing assets. This equates to an underlying industry profit of only 0.5�/l. of refined product produced and sold in Australia.

Ernst & Young�s analysis indicated the companies averaged a return on assets of just 2.6%, which is well below the real cost of capital.

The industry in Australia is also looking at worse to come, because it is facing an immediate capital investment program of around $1.3 billion.

Seven of the country�s eight main refineries must spend large amounts on plant upgrades in the next 3 years to comply with the Australian government's directive to produce cleaner (low sulfur and low particulate) fuels to comply with increasingly stringent global standards.


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