Fuels retailer Ampol expects to make a decision within weeks on the future of its Lytton refinery in Brisbane, as it awaits the details of a federal government rescue package which could safeguard the facility’s future.
After a torrid period of trading for Australia’s refineries which has seen BP and ExxonMobil decide to shutter their plants, Ampol said it was close to a call on whether to keep Lytton open or convert it into an import facility following its review.
The review has assessed both the refining margin and demand outlook, along with the implications of BP’s Kwinana and Exxon’s Altona plant closures. The outstanding piece concerns the shape of the Morrison government’s fuel security package amid expectations a minimum 1c a litre interim refinery production payment will need to be bolstered to keep Lytton open.
“The detail and the certainty of the government support initiatives are really the key final outstanding items to be addressed so we understand exactly what the package looks like,” Ampol chief executive Matt Halliday told media after the company’s annual general meeting on Thursday.
“That’s what needs to be finalised prior to the review being completed and that will occur in the coming week.”
Ampol’s chairman Steven Gregg told shareholders there was still some uncertainty over the package although sources said talks had been positive between the company and government.
“The budget flagged the Morrison government’s package for fuel-security, with the final details of this currently being finalised with the refining sector,” a spokesperson for Energy Minister Angus Taylor said.
“The government remains committed to having the long-term production payment commence from July 1, 2021.”
The Sydney company decided against taking up the Commonwealth’s interim fuel subsidy, concerned accepting the payment would lock it into keeping Lytton open before it had concluded its own internal review.
Canberra offered refiners a minimum payment of 1c per litre for production of petrol, diesel and jet fuel from January 1, 2020 under an accelerated subsidy designed to bridge the gap until a long-term package kicks in by July 1. Ampol’s main rival, Viva Energy, accepted the deal and received $19.6m in the first quarter of 2021.
Fears have been growing the nation’s refining sector could disappear entirely in the face of falling demand brought on by the pandemic and competition from far larger refineries in Singapore, South Korea, Japan and elsewhere in Asia.
Ampol also said the government’s budget had struck the right balance between chasing economic growth and being realistic over the pace of COVID-19 recovery.
Businesses will be able to plan further ahead for major asset purchases and write off their full value after the government extended its flagship scheme by a year until mid-2023.
“The extension of that program is designed to stimulate investment and that supports jobs and growth of the economy and that’s fundamental to the budget that the government handed down,” Mr Halliday said.
Asked if he was concerned by the prospect of Australia running a decade of deficits, the Ampol chief said: “I think the government has struck a very nice balance. We need to be realistic, we are still working our way through a very significant pandemic that is going to be managed for some time to come.
“We need to deliver jobs and growth into the economy and when you look at Australia’s position from COVID-19 and debt to GDP, it’s quite well positioned from a global point of view.”
Ampol has previously vented frustration over Australia’s haphazard response to COVID-19 outbreaks with the fuels supplier among the worst hit by the airline industry crisis with sales of jet fuel plummeting last year.
Ampol shares fell 0.8 per cent on Thursday to $25.87, in line with the broader market.
Extracted in full from: https://www.theaustralian.com.au/business/ampol-nears-decision-on-future-of-lytton-refinery/news-story/aa5b25db4ad1bdff24881b5ed3bae705