Fuel dealer Ampol expects to make a decision on the future of its Lytton refinery in Brisbane within a few weeks as it awaits the details of a federal government bailout that could secure the future of the facility.
After a hot trading period for the Australian refineries that saw BP and ExxonMobil decide to close their plants, Ampol said it was on the verge of keeping Lytton open or converting it to an import facility after its review.
The review assessed both the refining margin and the demand outlook, as well as the impact of the plant closings by BP in Kwinana and Exxon in Altona. The standout piece concerns the shape of the Morrison government’s fuel security package, as it is expected that at least 1 cent per liter of intermediate production will need to be spiked for refinery production to keep Lytton open.
« The detail and certainty of government support initiatives are really the most important outstanding issues that need to be addressed in order for us to fully understand what the package looks like, » Ampol CEO Matt Halliday told the media after the company’s annual general meeting on Thursday .
« That has to be done before the review is done, and that will be done in the coming week. »
Steven Gregg, chairman of Ampol, told shareholders there was still some uncertainty about the package, although sources said talks between the company and the government had been positive.
« The budget marked the Morrison government’s fuel safety package, the final details of which are being finalized by the refining sector, » said a spokesman for Energy Secretary Angus Taylor.
The Sydney company decided against drawing on the Commonwealth’s provisional fuel subsidy because it was concerned about accepting the payment to keep Lytton open before it had completed its own internal review.
Canberra offered refiners a minimum payment of 1 cent per liter for gasoline, diesel and jet fuel production from January 1, 2020 under an accelerated subsidy to fill the gap until a long-term package kicks in by July 1. Ampol’s main competitor Viva Energy accepted the deal and received $ 19.6 million in the first quarter of 2021.
Fears have grown that the country’s refining sector could disappear entirely amid falling demand from the pandemic and competition from much larger refineries in Singapore, South Korea, Japan and other Asian countries.
Ampol also said the government budget struck the right balance between tracking economic growth and realizing about the pace of the COVID-19 recovery.
Companies will be able to plan for major asset purchases further in advance and write off their full value after the government extends their flagship program by a year through mid-2023.
« The expansion of this program is designed to stimulate investment, jobs and economic growth. This is fundamental to the government’s approved budget, » Halliday said.
When asked if he was concerned about the prospect of a decade of deficits in Australia, the Ampol chief said: « I think the government has struck a very good balance. We have to be realistic, we are still working our way through one very significant pandemic that will take time.
« We need to bring jobs and growth to the economy, and when you look at Australia’s position on COVID-19 and debt to GDP, it is reasonably well positioned from a global perspective. »
Ampol previously expressed frustration over Australia’s random response to COVID-19 outbreaks with the fuel supplier worst hit by the aviation industry crisis when jet fuel sales declined last year.
Ampol stock fell 0.8 percent to $ 25.87 on Thursday, in line with the broader market.
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