Australian refiners confront market scramble
Australia's refining industry is undergoing spasms of contraction and expansion.
Shell Australia Ltd. and Mobil Australia Ltd. have confirmed reports of discussions between them regarding a possible merger of their refining assets.
While this consolidation is being considered, BP Australia Ltd. has disclosed plans for a $500 million (Australian) expansion of its Bulwer Island refinery near Brisbane in southeastern Queensland.
Merger?
The possible merger of refining assets in Australia could include Mobil's Melbourne and Adelaide refineries and Shell's Geelong and Sydney refineries.The idea would be to pool the refinery assets and allocate certain types of products to single refineries.
However, the companies said that talks were by no means final and that both were discussing opportunities with a number of companies.
Talk of such mergers comes in the wake of poor financial performances by Australia's refiners in the past 4-5 years. In 1997, for instance, net profits for all four Australian refiners (Shell, Mobil, Caltex Petroleum, and BP Australia) fell 77% to just $81 million (Australian). That represented a return on equity of a mere 2%.
The companies have endured intense price pressures in the last few years as independent retailers import gasoline put on the market by Asian refiners that concentrate their efforts on diesel fuel and sell the gasoline cheaply, as it is excess to their needs.
BP refinery expansion
BP's proposed refinery expansion represents an attempt to win back some of the market lost by Australia's refiners to cheaper refined products imported from Asia by independent marketers.The announcement came just days after the Australian government announced plans to scrap the wholesale ceiling price-setting system and abolish current restrictions on the number of service station outlets that the major oil companies can own in Australia (see related story, this page).
The Bulwer Island expansion will increase the refinery's capacity by about 25%, from the current 80,000 b/d to about 100,000 b/d. The product emphasis will be switched to low-sulfur gasoline and diesel fuels.
BP alone has earmarked capital outlays of $250 million (Australian) for the project.
Its partners include BOC Gases Australia. The expanded facilities are scheduled to come on stream in 2001.
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