Shell Australia's downstream vice president Andrew Smith said Thursday the decision to sell the Geelong refinery is in line with Shell's strategy "to globally concentrate refinery investment in large sites and locally concentrate downstream investments in the growth opportunities in our retail and bulk fuels businesses as well as the terminals and pipelines which support them," Platts reports.
The 55-year-old Geelong plant supplies about 50 percent of transport fuel used in Victoria and about 30 percent of what is consumed in the neighboring state of South Australia. It has about 450 employees and 100-150 contractors.
Competition from cheaper mega-refineries in Asia has transformed Australia from an exporter to importer of liquid fuels, notes a report in The Sydney Morning Herald.
After the scheduled closure next year of Caltex's Kurnell refinery, Australia's refining capacity will have been cut 28 percent, and the closure of Shell's Geelong plant will reduce that capacity by another one-fifth.
A House of Representatives economics committee last year said that oil refiners in Australia were at a ''competitive disadvantage,'' because of aging plants, higher operating costs, inadequate infrastructure and the high Australian dollar.
Smith says that if Shell can't find a buyer for the Geelong plant "with agreeable terms and conditions," the company will consider turning it into an import terminal. Last September Shell closed its Clyde refinery in Sydney to convert it into an import terminal.
But experts are doubtful that Shell would find a buyer for the refinery.
"There aren't any obvious buyers for a refinery of this size in this part of the region," Andrew Inwood, the head of advice with CoreData, which works in the energy sector, told the Australian Broadcasting Corp.
"Most of our oil comes out of Singapore and that's a place where we can find much more effective refineries producing many more barrels a day at a much lower cost," he said, adding that Australia is now a high-cost area.
The largest wholly owned Shell refinery in the world is in Pulau Bukom, an island belonging to Singapore.
With Australia relying on imports for at least half of its fuel, future fuel security is a concern.
'The continuing trend towards reliance on imported fuels raises a question about whether we have an adequate back-up plan in the event there is a major disruption in fuel supply from imported sources,'' Australian Automobile Association Executive Director Andrew McKellar said in response to sale of Geelong, The Age reports.
But Smith said Shell is investing in its other Australian downstream businesses such as retail, commercial fuels, aviation, lubricants and bitumen, "and will continue to ensure safe and reliable supply."