Viva boss Scott Wyatt’s timing is superb in seeking government assistance to support his Geelong refinery. But Prime Minister Scott Morrison should politely decline, as he did with Virgin.
Sadly, while Virgin found a sugar daddy in Mike Murphy at Bain, it is unlikely anyone will come rushing to the support of Viva’s Wyatt, because the economic reality is against the viability of an Australian refining industry.
Ask Wyatt what he wants and it’s a package including cheaper energy costs (he’s not Robinson Crusoe on that score), support with the location of the planned storage terminals, better channel depth at Geelong (to allow full tankers to dock) and financial support.
The industry has been on the nose for decades, unable to compete with the bigger government supported refineries in Asia. It’s stuck in no-man’s land with a small domestic market as a price taker, reliant on whatever the Asian crude price may be. The global price is set by factors way outside Scott Wyatt’s control.
Inevitably if the government comes to his support today, in a decade he will be back again with his hand out looking for more.
This said, his timing is politically superb, because all of a sudden Andrew Liveris et al are talking up local manufacturing, control of supply chains and cheaper east coast gas.
Wyatt employs 700 people at his Geelong refinery and it is not his fault the state government has shut the Victoria in a nonsensical hunt for eradication of COVID-19.
But get out the history books and you could almost set your clock by the regularity of the Australian petroleum refinery industry on its knees demanding financial support on the grounds of self sufficiency.
Forget it – the time is up just like it was for the car industry.
This said, no choice is easy for Wyatt because if he was to convert Geelong to an import terminal that would set him back $300m, so we are not talking peanuts.
But in a good year he earns $500m, of which $200m, is from the refinery and $300m from his retail and commercial network including the Shell service stations.
If Morrison relents and hands some compensatory coin to Wyatt, Matt Halliday from Ampol will be on the phone looking for a few scraps for his Lytton refinery.
Energy Minister Angus Taylor is in the process of rolling out storage terminals which if housed next to a refiner could ease the cost burdens.
There is an ecosystem in Victoria to support given Geelong refines Bass Strait and Cooper Basin oil which in turn supports the gas industry which in turn supports Qenos and other manufacturers.
These are guys Liveris wants to help to boost Australia’s industry capability.
But local refining is simply challenged because the entire Australian industry is smaller than one Asian refiner.
Wyatt’s Geelong plant processes 6bn litres a year, which is one fifth of what the Singapore refiners do. No wonder he is struggling to earn his keep in good years.
The federal government played hardball with Virgin (but shamefully not with REX) and should do the same with Viva.
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