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Australian Ampol may shut oil refinery despite national security push

October 09/2020

MOSCOW (MRC) -- Ampol Ltd is considering closing its Lytton oil refinery, one of Australia's four refineries, as it has racked up big losses because of a coronavirus-driven slump in fuel demand and competition from huge Asian plants, reported Reuters.

Ampol, formerly known as Caltex Australia, may close Lytton despite a recent offer from the Australian government of incentives worth AD2.3 billion (USD1.6 billion) to the industry to keep the countrys refineries open for the sake of national security.

Ampol's shares rose as much as 2.3% after flagging the refinery review, outpacing gains in the broader market.

We really appreciate the government recognizing with its proposed package the challenges that the refining sector is facing,...but we need to be realistic about the extreme structural pressures that Lytton is facing, Ampol chief executive Matt Halliday said in an interview.

Ampol on Thursday reported a AD141 million loss at the plant so far this year, worse than analysts expectations.

That demand destruction and the oversupply that weve seen ... presents a very challenging outlook for margins, Halliday told Reuters.

Thats on top of the pressures that we face in the international context. The (Australian) refineries are relatively small and relatively old.

Ampol said it would review the future of the Lytton plant, located in Queensland state, by the second quarter of 2021, weighing up whether to close it, turn it into a fuel import terminal as it did with its Kurnell refinery in 2014, continue existing operations or try other models of operation.

Lyttons larger than expected loss for Q3 reflects a combination of weak refining margins and the structural aspect of its relatively high fixed cost base, RBC analysts said in a note.

Energy Minister Angus Taylor said in emailed comments the government was working closely with Ampol and the industry on its fuel security package.

Analysts have expected Ampol, which fended off a takeover offer earlier this year, to shut Lytton to boost returns.

Rival Viva Energy Group Ltd last month also warned it might shut its refinery in Geelong, near Melbourne.

As MRC wrote before, Ampol brought forward the refinery turnaround to May, 2020, as refining margins crashed and extended the outage from two months to four months to the end of August to allow for social distancing of workers at the site.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
Author:Margaret Volkova
Tags:PP, PE, LLDPE, crude and gaz condensate, propylene, ethylene, petrochemistry, Australia, Russia.
Category:General News
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