Kwinana closure to hit crude suppliers

BP’s decision to shut Western Australia’s Kwinana refinery has been criticised by several of the plant’s oil suppliers.

BP’s decision to shut Western Australia’s Kwinana refinery has been criticised by several of the plant’s oil suppliers who raised concerns over the nation’s fuel security once the British energy giant closes its doors.

Jade Energy and Triangle Energy both provide crude to the facility from their Perth Basin fields but neither company had been served with a formal notice of termination despite the planned closure of Kwinana, Australia’s largest refinery.

“We were disappointed with the announcement of the planned closure of the refinery because it’s an important piece of Australian infrastructure,” said Jade Energy director of oil and gas Chris Newport.

“It is the only refinery on the west coast with history, strategic importance and strong support for local communities associated with it

“From an industry perspective, it is critical that, ahead of any refinery closure, both federal and state governments work together with industry to ensure an open and transparent regime is in place for oil export from Kwinana. Industry investors must have comfort and long-term certainty to ensure that high levels of fuel and energy security are maintained for our country.”

Jade supplies Kwinana from its Jingemia oilfield, located in the North Perth Basin, where late last month it announced plans for a new three-well drilling program.

“Jade Energy believes locally produced crude oil forms the backbone of any energy security policy and we look forward to working with BP and government entities to ensure this is maintained.

“We note the government’s recent decision to build an emergency oil stockpile, via the US Strategic Petroleum Reserve, and look forward to complementing this with significant local production,” Mr Newport said.

BP has said it would ensure security of supply to its WA customers by expanding its import facilities at Kwinana, which already has an import terminal.

Energy Minister Angus Taylor will hold meetings this week with Ampol, which runs Lytton in Brisbane, Viva Energy — operator of Geelong in Victoria — and ExxonMobil’s Altona plant, also in Victoria, as fears mount the entire oil refining industry could be gone within a year. He will sound out refiners on 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.

Shares in Triangle Energy plunged 28 per cent to 2.3c on Tuesday after it emerged from a trading halt following the British giant’s decision to close the West Australian plant.

The WA producer delivers crude from its Cliff Head oil project to Kwinana under a supply deal and said it was now assessing both domestic and export customers as it searches for new markets to supply.

Triangle said it had not received a formal notice of termination under the supply agreement.

It noted BP had advised it would keep operating Kwinana for “many months” as it moved to converting the facility to a fuel import terminal.

“Triangle shares the concerns voiced by the West Australian and federal governments and believes ongoing refining capability is vital for the nation’s future energy security,” the company said in a statement.

“Triangle has investigated several export and domestic markets for its product in the past and will continue these efforts in parallel with government policy measures aimed at protecting Australia’s domestic refining capability.”

Some 600 manufacturing workers will be out of a job within six months following BP’s decision to close Kwinana.

The move has ratcheted up 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.

Jade noted there were other options to export crude including from the deep water Geraldton Port.