Exxon to shut Altona oil refinery

AFR – 9^th February, 2021

Australia’s embattled oil refining sector is set to suffer another heavy blow, with ExxonMobil expected to announce the closure of its 72-year-old Altona refinery in Victoria on Wednesday. The US energy giant is understood to have advised the Victorian government of its decision, which comes less than five months after fellow international major BP pulled the plug on its only remaining refinery in Australia, at Kwinana in Western Australia.

ExxonMobil’s Altona refinery in Victoria looks slated for closure with the loss of up to 350 jobs. The closures fly in the face of the determined bid by the Morrison government to secure the future of the country’s shrunken refining sector, with a $2.5 billion fuel security package announced last September that offers a direct subsidy for petrol, diesel and aviation fuel.Only one of Australia’s four remaining refineries has accepted the subsidy – Viva Energy’s Geelong plant – and expectations across the industry have been that it would not be enough to keep Exxon from closing the outdated and inefficient Altona plant.

An Exxon spokesman declined to comment on Tuesday. A formal announcement is expected to be made on Wednesday before midday. The US company is understood not to have made any requests to the state government for a rescue package to help keep the refinery open, although talks are thought to be ongoing.

The country’s four refineries had combined losses of hundreds of millions of dollars last year after the COVID-19 pandemic decimated demand for jet fuel and hit refining margins. The small and outdated plants have been unable to offset the impacts of the weak market by cost-cutting and production cutbacks, with the two plants in Victoria being particularly hammered during Melbourne’s extended lockdown. The closure of Kwinana, which is due to stop processing oil this March quarter, will mean the loss of almost 600 jobs and the shutdown of Altona is expected to lead to up to 350 more jobs going.

An Exxon spokesman last November signalled the Altona plant was vulnerable to closure and urged the federal government to bring forward its fuel security package. An interim subsidy of 1.15¢ per litre was then introduced from January 1 this year, ahead of the full subsidy to kick in on July 1. But as recently as last month, Exxon was still saying it was evaluating the package and had not committed to taking the subsidy, which requires a refiner in return to commit to keeping its plant open.

Wider threat

The Morrison government is also offering diesel storage contracts to refiners as another element of its fuel security package that would also assist with the viability of the sector.

MST Marquee energy analyst Mark Samter said he would be “absolutely staggered” if ExxonMobil did not close Altona, given its lack of relevance in Exxon’s global operation.

“From what I can tell, they haven’t taken the six-month government support, so feels inevitable they close it,” he said.

The refinery, which opened in 1949, is central to the industrial heartland of Victoria, producing about half the state’s petrol output or about 14.5 million litres a day of refined products when fully operating. It also supplies critical feedstocks for the Altona chemical complex next door, signalling a threat to chemical manufacturing plants too if its production is lost.

“If Altona is to close, unfortunately, I believe this will create additional downward pressure on more businesses in the weeks to come,” said Australian Workers’ Union national secretary Daniel Walton, who has led a trade union campaign to save the sector.