Brian Robins
February 17, 2012
The Age
CALTEX is clearing its books as it prepares to concentrate on oil retailing and distribution, yesterday moving closer to a decision to close its Australian oil refineries, which will involve axing as many as 1500 jobs.
Caltex slashed $1.5 billion off the value of the two refineries – Sydney’s Kurnell and Brisbane’s Lytton refineries – cutting their combined value to just $340 million. Between them they refine almost a third of all domestic petroleum products.
The write-down comes as the company works through a detailed assessment of the future of the two refineries, which have a combined daily processing capacity of 244,000 barrels of oil. Caltex has 800 staff at the two sites and about 650 contractors.
Caltex has blamed the strong Australian dollar coupled with rising costs for the pressures on its refining business, and six months ago it moved to review the future of this division. Yesterday it said that review would be finalised in the middle of the year.
Rather than refining, Caltex wants to focus on marketing and distribution, where it is has enjoyed strong growth. ”This business has grown its [earnings before interest and tax] since 2007 at a compound annual rate in excess of 13 per cent,” Caltex chief executive Julian Segal said yesterday.
An added attraction is that these activities do not tie up much capital.
Caltex already sources 40 per cent of its refined petroleum product from abroad, a figure which continues to rise as domestic demand expands.
According to a report by the competition watchdog, the Australian Competition and Consumer Commission, in 2008, Australia sourced only a fifth of its refined oil product locally, down from 37 per cent seven years earlier.
Caltex said it had held its earnings forecasts unchanged, even with the write-down.
Built in the 1950s, the Kurnell refinery is the larger of the two, with a capacity of 135,000 barrels a day, while Lytton, commissioned in the mid-1960s, has a daily capacity of 109,000 barrels.
However, the two refineries are competing against imported product from refineries in Asia, most notably in Singapore, which have much larger capacities. The larger capacities give the imported refined product a significant cost advantage.
Caltex shares yesterday shed 19¢ to close at $12.35.
Subscribe to our free mailing list and always be the first to receive the latest news and updates.