Viva Energy will partly shut down its refinery in Geelong in the latest move among the country’s fuels suppliers to ease a surplus of petrol caused by the drastic reduction in demand during the COVID-19 pandemic.

A key processing unit that primarily produces petrol and other fuels and a smaller crude distillation unit will be shut down from early May, Viva said on Monday, noting that all other units will continue to run.

The shutdown will reduce crude processing by an estimated 30 per cent. Shares in Viva, which owns the former Shell refinery and petrol station network in Australia, were up 5¢ at $1.365 at about midday.

The decision comes as Viva is already re-examining its plan to carry out major maintenance work at the same petrol production unit, the residual catalytic cracking unit, from late August through to October due to COVID-19 restrictions. A decision on that review, which is separate to this closure decision, is expected by the end of June. The company has also slashed capital spending this year by about half.

Fellow refiner Caltex Australia has already brought forward a planned maintenance shutdown at its Lytton refinery in Brisbane to May from later this year. The work will be spread over four months rather than two, with the timing of the restart to hinge on an improvement in refining margins. Australia’s other two refiners, ExxonMobil and BP, have also adjusted production at their plants, in Altona and Kwinana, respectively, as they struggle with the slump in demand, in particular for jetfuel and petrol, due to restrictions in place to prevent the spread of COVID-19.

Viva said on Monday that it had taken steps over the past month to reduce operating rates at processing units as it sought to balance supply with reduced demand.

It said the decision now to shutdown the catalytic cracker and other units “is required in order to further reduce surplus production and continue operations during a period where fuel demand is lower than normal”.

The shutdown is expected to reduce crude processing to about 2.5 million barrels a month. That compares with an average of 3.6 million barrels a month in the March quarter.

It is expected to have an “immaterial” impact on profits given current margins, Viva said, adding it expects no disruption to fuel supply. Viva reported refining margins at Geelong of just $US2.70 a barrel in the March quarter, down 45 per cent from a year earlier.

The fuels supplier has previous pointed to a reduction in demand for jetfuel by 80-90 per cent while the COVID-19 restrictions are in place, while Caltex has estimated a reduction in petrol demand of as much as 50 per cent, and in diesel demand of as much as 30 per cent.

Federal energy minister Angus Taylor last week said the government would work with refineries on temporary measures to ease the stockpiles of jetfuel by relaxing fuel standards.

Extracted from AFR