Australian refiner and fuel marketer Ampol will keep open the 109,000 b/d Lytton refinery in Brisbane, Queensland, after the Australian federal government increased the amount of state subsidies for at least another six years by pledging to partly fund any plant upgrades.
Canberra has pledged to provide A$2.3bn ($1.78bn) in state financial support. Most of the funding will come from a variable payment on each litre of refined oil products sold in Australia, with up to 1.8¢/l paid when refinery margins drop to A$7.30/bl, Australian energy minister Angus Taylor said. The payments cut out when the refinery margin reaches A$10.20/bl.
"This will mean that the refineries are only supported in downtimes, and will not receive government support when they are performing well," Taylor said.
Around A$2bn is expected to be raised through the additional tax payment, also known as a fuel security services payment (FSSP). Australia's average product sales are around 1mn b/d.
The January-March Lytton refinery margin was $5.48/bl, slightly above the $5.13/bl for October-December and the average of $4.70/bl for 2020. Refineries will have an option to extend the support and their commitment out to mid-2030, Taylor said.
Ampol welcomed the federal government's proposed support, which provides a variable support payment of up to A$108mn/yr for Lytton's operations during periods of low refining margins, the company said. Lytton stemmed its recent losses during January-March with neither a loss or profit on a profit before its interest and tax metric (pbit) metric. Lytton reported a pbit loss of A$145mn in 2020.
"Ampol intends to commit, as required by the government package, to ongoing refinery operations at Lytton until at least 2027, as a partner with government in meeting the dual objectives of fuel security and energy transition," Ampol managing director Matt Halliday said.
Government legislation to support the increased government subsidies is anticipated early in the second half of 2021, Halliday said. Ampol may reconsider its decision if this does not occur as planned, he said.
BP already closed its 146,000 b/d Kwinanarefinery in Perth, Western Australia at the end of March. ExxonMobil plans to close its 90,000 b/dAltona refinery in Melbourne, Victoria in the coming months.
The operator of Australia's only other refinery staying open, Viva Energy, also welcomed the increased government funding, having alreadyaccepted the initial payment proposal in December for its 128,000 b/d Geelong refinery in Victoria.
"The structure of the FSSP is not designed to underpin or support profits of Geelong, but rather to mitigate some of the downside risk of low refining margin cycles, to which Australian refineries are exposed outside of their control," Viva managing director Scott Wyatt said. "Reducing this risk allows us to proceed with greater confidence, as we seek to invest in the future of the Geelong site."
The FSSP replaces the existing temporary refinery production payment, which Viva expected to receive around A$40mn or A$2.21/bl to 30 June 2021.
Canberra intends to introduce minimum stockholding obligations on gasoline, jet fuel and diesel on a staged basis and will provide A$50.7mn in stock payments, Viva said.
Canberra will provide A$302mn for refinery upgrades to bring Australia's gasoline sulphur fuel standards into line with much of the developed world of 10 parts per million (ppm) of sulphur (0.001pc) from the current 150ppm. It plans to bring forward the implementation of the new fuel standard to 2024 from a previous 2027.
The government will also accelerate a review of gasoline and diesel standards, aiming to create requirements equivalent to the EU's Euro-6 vehicle emissions specifications that are appropriate for Australia, Taylor said. Australian consumers cannot buy some of the newer car models as the vehicles cannot tolerate Australia's current fuel standards.
Z Energy (NZX:ZEL ASX:ZEL) (Z) is pleased to announce that it has agreed in-principle to the terms offered by The New Zealand Refining Company (NZX: NZR) (Refining NZ) to transition the refinery to an Import Terminal System (ITS).The in-principle agreement is non-binding and contingent upon several conditions including Refining NZ satisfying lender requirements as well as the completion of a binding Terminal Services Agreement (TSA) with all ITS users. Final approval of the deal will be required by the independent directors and shareholders of Refining NZ. Z will work with Refining NZ with the objective of securing final approval in the third quarter of 2021.The TSA will have an initial term of 10 years with the option for customers to extend and will include various contractual performance obligations on Refining NZ for the operation of the ITS. Z’s Chief Executive Mike Bennetts said, “Transitioning Refining NZ’s operations to an import terminal is the right decision. We have carefully considered all the options open to Z in making this decision and we have agreed the in-principle deal to provide clarity and certainty around safe and reliable fuels supply for New Zealand. The refinery can now move forward with its ITS conversion plans and preparation for obtaining approvals, while Z can progress towards its preferred operating model of exiting the crude supply chain. The New Zealand fuels industry is about to enter a period of significant transformation with changes resulting from the Fuel Industry Act and the conversion of the Refinery. These changes will deliver flexibility and pricing transparency for our customers, reduce the environmental impact to New Zealand of domestic refining, reduce the volatility in Z earnings while releasing considerable working capital from Z’s supply chain,” Mike added. Until the details contained within the TSA are agreed and Refining NZ has confirmed the transition schedule Z is unable to advise of any impact of the conversion to FY22 guidance. The financial impact of the ITS transition to FY23 earnings and beyond will be covered at Z’s Investor Day planned for 28 July 2021 by which time Z expects to have finalised the TSA.
What an opportunityfor Australia to export refined products to New Zealand.
