The owner of the Geelong oil refinery is in talks with the Victorian government over a potential co-investment deal to help turn the site into an energy hub and prevent the plant’s closure.
Losses at the 65-year-old oil refinery, owned by ASX-listed Viva Energy, have blown out to nearly $80 million and put the fate of its 700 workers in doubt. A pandemic-induced collapse in fuel demand has gutted the plant’s profit margins and triggered a review of the refining business to assess options including permanently shutting down the faciity.
In a sign of the severity of the threat facing refiners, BP last week announced the closure of the country’s largest oil refinery, the Kwinana refinery in Perth, leaving Australia with just three oil refineries remaining and a greater reliance on imported transport fuels.
While the Morrison government has been leading discussions with the refiners to develop a rescue package, including a 1.15¢-a-litre payment for locally made fuel, industry and government sources have told The Age and Sydney Morning Herald the Daniel Andrews-led government is also mulling options to keep Viva’s Geelong refinery open.
One proposal is for Victoria to co-invest in Viva’s plans to transform the oil refinery’s site into an “energy hub”, which would include the development of a shipping terminal to import liquefied natural gas (LNG) and a solar farm alongside the refinery, according to the sources, who asked not to be identified as the discussions were confidential.
“These government decision processes take time, but both parties are happy with the progress being made,” one said.
The Andrews government would not comment on the discussions with Viva but said it was aware of the pressures facing the Geelong refinery.
“We’re well aware of the considerable impacts the pandemic is having on business and industry and we’re closely monitoring the situation at Viva Energy,” a government spokesman said.
Federal Energy and Emissions Reduction Minister Angus Taylor, who met with Viva executives on Tuesday morning, called on the Andrews government to step up and help complement the federal government’s efforts to retain local refineries and strengthen national fuel security.
“As Victoria is home to two of Australia’s refineries, the Victorian government should be stepping up to provide tangible support to the sector and its workforce,” he said.
Victoria’s two refineries – the Geelong plant and ExxonMobil’s Altona refinery – along with Ampol’s refinery in Brisbane have been pushed to breaking point since the outbreak of COVID-19, with mobility restrictions to arrest the spread of infection keeping borders closed, planes grounded and cars parked in driveways. The restrictions have wiped out demand for petrol by up to 50 per cent and jet fuel by 90 per cent.
Viva’s review of its Geelong refining operations is expected to be completed by December. Ampol’s Brisbane refinery has also been placed under review and is in danger of closure.
Ben Davis, the Victorian secretary of the Australian Workers Union, said there were more than a 1000 well-paid manufacturing jobs in jeopardy across the Geelong and Altona refineries alone and urged state and federal governments to do “whatever it takes” to maintain domestic refining.
“The announcement at BP last week sent a shudder down our collective spines,” Mr Davis said.
“We are losing one refinery, we do not want to lose a second or a third.”
Geelong has been battered by a series of industrial closures in recent years, with large-scale blue-collar lay-offs at Alcoa’s former Point Henry aluminium smelter and carmaker Ford’s historic engine plant. Questions about the oil refinery’s future have lingered since it was sold by Shell in 2013, as the local refining sector has struggled to compete against the mega-refineries of south-east Asia with their vastly larger scale and lower operating costs.
“The last thing Geelong needs is another hit to its economy,” Mr Davis said.
A Viva Energy spokesperson on Tuesday said the company had worked closely with state and federal governments during COVID-19. “And we will continue to do so in support of the sustainability of our refining operations in Geelong and in order to progress future projects like our Geelong energy hub,” he said.
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