Shell Australia Ltd. has completed upgrading of its two refineries, which it contends gives it the edge in a tight domestic market.
An investment of more than $620 million (Australian) in new production equipment at Clyde and Geelong refineries has enabled Shell to produce gasoline with half the lead content required by current and anticipated Australian legislation.
LEADED GASOLINE NEEDS
Australia's car population has an average age of about 14 years, down from an average of 17 years as owners held onto vehicles during the recent recession.
Consequently many car owners still require leaded gasoline.
The state of Victoria allows a maximum 0.25 g/l. of lead in gasoline, while in New South Wales the maximum is 0.3 g/l.
Shell's "half lead" grade gasoline is produced to contain half the maximum in each state. Clyde refinery is an 80,000 b/d plant located near Sydney, state capital of New South Wales. Geelong refinery is a 110,000 b/d plant near Melbourne, the Victoria state hub.
"Shell half lead gasoline enables those motorists who can't switch to unleaded petrol and can't buy a newer car to do something positive to reduce lead emissions," said Russell Caplan, Shell's executive director, downstream oil and chemicals.
Shell reckons Australia's total car fleet of 8 million vehicles includes 3 million that require some lead content in their fuel.
The company feels government might reduce lead content maximums in Victoria and New South Wales to 0.2 g/l. in new legislation expected in January.
Caplan said the company intends to produce its half lead fuels to contain half whatever the government maximum will be -without addition of aromatics and without erosion of octane values.
SHELL INVESTMENTS
In 1992 Shell began operating a $500 million (Australian) catalytic cracker at Geelong. In 1991, a $120 million (Australian) platformer was commissioned at Clyde.
The investments were triggered by previous disappointing returns in the tight Australian market.
Now Shell thinks it has about 5 years to reap the benefit of this investment-before other refiners can catch up and before tougher fuel legislation is enforced, perhaps requiring plant upgrades along U.S. and European lines.
"Other refiners are struggling to meet customer requirements while reducing lead levels," said Caplan. Shell claims to be the only Australian refining and marketing company to make a profit in the third quarter.
"This may just mean that we become the healthiest lemming to hit the foot of the cliff, but we believe we are best prepared with a market shakeout going on."
OTHER INVESTMENT NEEDS
Caplan said all players including Shell would have to invest hundreds of millions of dollars in their refineries to upgrade them in line with U.S. and European levels of legislation.
Two refineries have been closed in Australia in the last few years, and the overall number of service stations has been reduced by half.
Caplan believes continuing poor profits could lead to a couple of the majors pulling out of Australia following exits in recent years by Amoco Corp., Total, and Exxon Corp.
In the meantime, said Caplan, fuel legislation is the subject of continuing dialog with government.
"We would like ambient air levels rather than other countries' legislation to be the deciding factor in Australian environmental debates," said Caplan.
"Australia does not yet have the same specifications as U.S. and Europe, but there the densities of population and industry are much higher.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
Issue date: 12/12/94
