The downturn in demand for energy, especially petrol and jet fuel is hitting the Australian refining and distribution sector.
To cope, Caltex has brought forward a major maintenance program at its Lytton refinery in Brisbane which has been shut because of the slide in demand.
Yesterday Viva Energy said it’s Geelong refinery would be shutting down major processing units and scaling back output as the coronavirus crisis cuts demand for fuel.
Viva Energy owns the former Shell refinery at Geelong along with thousands of Shell-branded petrol stations across the country with Coles Express convenience stores and offering a fuel discount deal as well.
The company told the ASX on Monday it would cut crude oil processing volumes by closing the cracking unit and associated processing units from early next month.
This is in response to the impact of government restrictions aimed at slowing the spread of the pandemic, which have wiped out demand for petrol, diesel, and jet fuel in Australia and around the world.
“Over the last month, the Refinery has taken steps to operate processing units at reduced rates in order to balance refinery production with lower demand for fuel as a result of the measures in place to manage Covid-19,” Viva said yesterday..
“The shut down of the units noted above is required in order to further reduce surplus production and continue operations during a period where fuel demand is lower than normal.”
Australia’s current four refineries – including Viva’s in Geelong, Caltex’s in Brisbane, ExxonMobil’s in Altona, and BP’s in Kwinana in WA – have been under mounting pressure as their refining profit margins collapse along with demand.
“The shutdown of the units … is required in order to reduce surplus production and continue operations during a period where fuel demand is lower than normal,” said Viva .
The company said the decision to shut down the units would have an “immaterial” financial impact and was not expected to disrupt fuel supply.
Viva has previously announced it was suspending and reviewing plants to proceed with a $100 million maintenance program needed to prolong the life of its Geelong refinery. The company said the closure of the units would not affect the review.
The shares rose 1.1% to $1.375.
