Fuels retailer Ampol warns on Australian refineries closing
Ampol has given itself until June 2021 to make a decision on the future of Lytton.
Fuels retailer Ampol has warned the potential for more Australian refineries to close and switch to an import terminal model could lead to supply deals unwinding, adding a further complexity as it weighs up a decision on the future of its Lytton terminal in Brisbane.
Ampol has given itself until June 2021 to make a decision on the future of Lytton, with its competitors, Viva Energy and ExxonMobil also considering whether to keep their refineries open amid tough market conditions. BP has already decided to close its Kwinana refinery in Western Australia due to unsustainable losses.
Chief executive Matt Halliday told The Australian the market could quickly change depending on whether other refineries move to an import model, given it currently holds “swap” and supply agreements with other players in the industry. Rivals could also gain an increased ability to import fuels into Brisbane, impacting Lytton’s economics.
“How the domestic market will unfold through what’s ultimately a huge, rapid change in the refinery landscape we are not immune from, and we are looking into that very carefully as we make our decisions on the refinery review,” Ampol executive general manager for commercial Brent Merrick said as part of its annual investor day.
There are fears the nation’s refining sector could disappear entirely in the face of falling demand brought on by the coronavirus crisis and competition from far larger refineries in Singapore, South Korea, Japan and elsewhere in Asia.
Adding to tensions are changes in the Australian refinery sector to an import model and ongoing uncertainties over the specific shape of support from the Morrison government, which is currently in talks with the industry over an assistance package.
“Some of this is within our control, but there’s also how the market rebalances as other refineries potentially close and buy and sell arrangements are adjusted,” Mr Halliday said. “We’ve seen the BP announcement a few weeks ago.”
Ampol also said it was in talks to buy Puma Energy’s Perth fuels terminal in Western Australia as it looks to grab a greater share of the storage market following BP’s decision.
The fuels retailer, previously known as Caltex, revealed it would look to acquire the partially completed facility to build a stronger position in WA, where it holds no infrastructure assets. The terminal would store diesel, petrol and chemical supplies.
Ampol was considering the deal as the industry changes strategy.
“We’re clearly looking at an opportunity like the Puma terminal to ensure that we can extract full value from that integrated import chain in Perth,” Mr Halliday said.
Ampol hinted it may look at any deal as a springboard for further growth.
“With control you create new opportunities and it’s pretty rare you see an asset like this under construction for sale. We believe we are a logical owner of that terminal and would look to find a way to maximise returns from a change in supply chain for Ampol,” Mr Merrick said.
Puma, Australia’s largest independent fuel retailer, was scooped up for $425m in December 2019 by US giant Chevron.
However, the Perth fuels terminal was not included in the sale to Chevron.
Caltex was using the brand name under licence from Chevron but the US giant terminated the deal in December after re-entering the Australian fuel retail sector.
Ampol also on Monday launched a $300m off-market buyback after completing a sale of its convenience retail property assets for $635m.
It completed the sale of a 49 per cent stake in its property trust, comprising 203 convenience retail sites, to Charter Hall and Singapore sovereign fund GIC after first announcing the deal in August.
Ampol said on Monday the deal delivered net cash proceeds of $635m, higher than prior guidance of $612m.
It had originally planned to use the profits to cut debt given ongoing volatility in fuel demand.
However, conditions have improved as lockdowns lift across Australia, sparking the buyback decision.
The buyback, representing $1.20 per share on issue, will open on December 7 and complete on January 22.
Ampol shares rose 4.6 per cent to $29.75.
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