Australia’s fuels sector has been dealt a further blow with more than 100 jobs cut due to the slump in demand for jet fuel amid analyst predictions Ampol may shut its Lytton refinery after BP’s decision to close Kwinana.

The reductions across jet fuel operations at some of Australia’s biggest airports have exceeded 100 workers after steep falls in demand given the shutdown of air travel, sources told The Australian.

Several of Australia’s biggest jet fuel suppliers including Ampol and Viva Energy are among companies that have permanently shed roles given the rapid reduction in aviation demand.

Ampol said in October jet fuel volumes declined 64 per cent due to international and domestic travel restrictions while Viva said volumes fell by three-quarters compared to the same period a year earlier.

The job losses add to 600 manufacturing workers out of a job within six months following BP’s decision on Friday to close the nation’s largest refinery, Western Australia’s Kwinana facility. BP will also slash 20 per cent of its Australian staff in a further blow to the nation‘s energy sector, with the British oil and gas giant starting the process of cutting about 200 office roles.

Energy Minister Angus Taylor will hold crunch talks this week with Ampol, which runs Lytton in Brisbane, Viva Energy, operator of Geelong in Victoria, and ExxonMobil, owner of Victoria’s Altona plant, as fears mount the entire oil refining industry could be gone within a year.

The Lytton refinery could also face the axe, according to Goldman Sachs, and be converted to an import terminal.

“Ampol is currently undertaking a strategic review of the Lytton refinery, with the potential for the asset to close ahead of historical expectations,” Goldman analyst Baden Moore said.

“On our numbers, a Lytton closure decision, while defensive on valuation in the medium term, would likely drive material earnings volatility through the transition, which is a risk to Ampol’s share price performance in the period.”

Further rationalisation of the sector appeared likely, the broker added, even with the federal government’s proposed assistance package for the industry, which includes the introduction of a production payment based on their fuel security contribution to Australia.

The “risk of further Australian refinery closures has increased with the 2020 pandemic, and we remain cautious on investor hopes for a subsidised return,” Mr Moore said.

“The increased stock level obligations appear to have bipartisan political support but production payments for refineries is more complex to implement, and faces political execution risk. In our view the negotiation with the government will likely delay any decision around closure of refining assets in Australia for the next 6-12 months, but further rationalisation of Australian refining remains likely.”

Ampol’s Lytton refinery booked a September quarter loss of $82m while Viva suffered a $30m loss. Both are under review with Ampol due to make a decision in the second quarter of 2021 while Viva will update the market in December on keeping Geelong running beyond the first quarter of next year.

Ampol and Viva both backed Canberra’s support package when it was announced but remain cautious over the outlook for the sector.

Extracted in full from: https://www.theaustralian.com.au/business/mining-energy/jet-fuel-jobs-go-amid-refinery-crisis/news-story/22d10dcdb2480e8e7963fa4880a73957

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