BP Australia has detailed the financial cost of closing its...

BP Australia has detailed the financial cost of closing its Kwinana oil refinery, with new filings suggesting the bill could reach $1 billion as the group joined Australia’s other major energy producers in posting a hefty loss for 2020.

The British-owned company has also disclosed that a final investment decision on Woodside Petroleum’s huge but ambitious Browse project won’t be made until 2025 after being delayed last year because of COVID-19.

BP Australia announced in October that it was closing its 65-year-old refinery at Kwinana with the loss of up to 600 jobs and replacing it with an import terminal because the plant was no longer viable.

The company’s annual report filed with the corporate regulator in recent days has detailed hundreds of millions of dollars of charges and costs that suggest the decision to quit oil refining in WA will cost it between $500m and $1b.

The charges include $613m of impairments against the value of BP Australia’s property, plant and equipment that “predominately” relate to the refinery’s closure.

It also incurred a $300m increase in expenses attributed to a combination of Kwinana and a global restructuring by BP that is shedding thousands of jobs as part of its transition to cleaner energy.

BP Australia said the increased expenses “include costs in relation to staff redundancies, inventory write-downs and decommissioning provisions”.

The company did not respond to questions about the likely costs of the WA closure.

The Kwinana charges and costs, together with a slump in oil revenues after last year’s plunge in prices, triggered a $2b reversal that saw BP Australia swing to a $1.4b loss for 2020 from a $747m profit previously.

Its directors noted that the result was achieved against a backdrop of “lower oil and gas prices, lower refining margins and unprecedented falls in demand for our retail and aviation fuels”.

Sales revenues crashed 36 per cent to $11.8b as realised oil prices fell by one-third, hit by first a price war between Russia and Saudi Arabia and then slumping demand for energy as the pandemic closed industrial operations around the world.

“The group's financial performance was achieved in a challenging environment,” BP Australia directors said.

“The COVID-19 pandemic has affected individuals, countries and businesses ..,. (and) led to reduced returns in the upstream and downstream,” they said.

“The group’s focus remains on delivering value through disciplined financial decisions and management, and capitalising on its strengths in the retail and wholesale markets in Australia.”

The bottomline result was also hurt by a failed exploration well off WA and a final impact from the company’s 2018 decision to quit exploration plans for the Great Australian Bight.

BP Australia and its partners sunk the Ironbark exploration well in the offshore Carnarvon Basin in October with hopes of striking a world-class gas resource. Instead, the well came up dry, triggering a $53m write-off of capitalised exploration expenditure.

The company also addressed the termination of its drilling contracts for the Great Australian Bight by booking a final $38m liability to cover “onerous drill rig costs”.

BP Australia is a 17.33 per cent partner in the Browse LNG project, which aims to link large gas fields off northern WA via a 900km pipeline to the NW Shelf venture’s Karratha gas plant.

A final investment decision was deferred last year to an unspecified date from 2023. However, BHP Australia’s accounts list FID as “late-2025”.