Caltex Announces closure of its Kurnell Refinery

Submitted: Thursday, Jul 26, 2012 at 10:10
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Caltex has announced that it will be closing the Kurnell refinery and will convert it to a major import terminal by 2014.

The major reason cited is that it will reduce its exposure to refining margins; essentially there is little money in the business of refining oil into refined fuels.

There has often been discussion on the forum about fuel companies ripping us off, a complex discussion that has often been subject to misinformation and a lack of understanding, and what the Caltex action today confirms is there is no money in the refining business.

What it means for Australia is that we are going to be far more reliant on imported refined product, and whilst we import most of the oil into our refineries as the oil produced in Australia is not suitable, we still had a refining capacity, this is now gone, and potentially has long-term security implications for Australia.



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Reply By: Member - John (Vic) - Thursday, Jul 26, 2012 at 10:36

Thursday, Jul 26, 2012 at 10:36
Just the start, Mobil Altona is next on the list under threat.

Carbon Tax, just another nail in the coffin of Aussie business.

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Follow Up By: Member - bbuzz (NSW) - Thursday, Jul 26, 2012 at 12:50

Thursday, Jul 26, 2012 at 12:50
Not the Carbon Tax!

Why do otherwise intelligent people need to score political points by blaming non related items on economic and environmental decisions that they don't understand.

Oh yes, stop those Gillard 'jokes' or send the same number about 'Phone Tony' just to achieve some sort of balance.

Bill
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Follow Up By: oldtrack123 - Thursday, Jul 26, 2012 at 13:29

Thursday, Jul 26, 2012 at 13:29
HI
Well at least we can say that Caltex did not push the "PHONEY ABBOT "line

"IT"S THE CARBON TAX responsible for ALL price increases""[problems.]

I guess they will not have an Abbot supplied placard, like many, to justify their decision

I see the latest to be caught out was an SA refrigeration Co
I wonder did they have such deceitful signs up TOO


I think it's time the ACC started to hit all the cons using that line with the HEAVY fines
Now THAT would soon bring the budget back into surplus

Peter
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Follow Up By: Allan B (Member, SunCoast) - Thursday, Jul 26, 2012 at 15:02

Thursday, Jul 26, 2012 at 15:02
Well certainly Caltex would have included any effects of the Carbon Tax in their considerations of future operating costs, but you can see the real facts here.

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Follow Up By: Member - John (Vic) - Thursday, Jul 26, 2012 at 15:48

Thursday, Jul 26, 2012 at 15:48
Any cost increases of doing business in this country would be a factor that has to be calculated, naive to believe anything else.
As Landy quite rightly points out, Caltex like other refiners has struggled with its refining margins for a very long time plus the added cost of maintaining a very old facility.

The CT came in on July 1st and almost 4 weeks later Caltex makes it decision, does anyone really doubt the CT was the final nail in the coffin that made the decision that little bit easier to make!

After all the whole purpose of the CT is to force industry to change the way it does business and look for cheaper options of producing.
Whats cheaper than going overseas?

Get used to it, a number of manufacturers such as car manufacturing, aluminum smelting etc will leave our fine shores due to a poor local business environment, even the SA Trade Unions are now agreeing with Abbott over the risk to the steel industry. (Link Below)

If there was no cost impact, why is Gillard handing out massive amounts of borrowed cash as compo to the impact of the CT??

The cost of the CT is not so much felt today as it will, as it rises in the years to come, Caltex is looking at the long term picture and know its costs will continue to rise in future years because of it.

Caltex management won't say much about the CT as its politically troublesome to them to do so, easier to say, "it has no material effect" and let Gillard off the hook.

Adelaide Now, Steel Industry threatened by CT


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Follow Up By: Bazooka - Thursday, Jul 26, 2012 at 18:13

Thursday, Jul 26, 2012 at 18:13
Any impartial analysis will show the carbon tax is a very minor factor in all these decisions.
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Follow Up By: Member - John (Vic) - Thursday, Jul 26, 2012 at 18:23

Thursday, Jul 26, 2012 at 18:23
Would you like to provide empirical evidence of the impartial analysis that demonstrates the minor factor?

Every so called minor factor is critical when you operate in an industry such as refining that operates under razor thin margins.

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Follow Up By: Allan B (Member, SunCoast) - Thursday, Jul 26, 2012 at 19:04

Thursday, Jul 26, 2012 at 19:04
I see that you recognise the Carbon Tax as a factor Baz, even if only 'minor'.

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Follow Up By: Bazooka - Thursday, Jul 26, 2012 at 21:02

Thursday, Jul 26, 2012 at 21:02
Try reading the wide range of commentary available on the affects of the carbon tax with both eyes open John. There's a raft of overseas experience, treasury modelling and plenty of reasonably unbiased commentary which suggest precisely what I stated.

Sounds like you've been listening to Abbott's rhetoric too long. We've heard the same hyperbolic nonsense rolled out by the big miners about the MRRT. Under scrutiny their claims that the tax will reduce investment and is the reason for some projects being delayed or not proceeding have invariably been shown to be 'highly inaccurate'. That's hardly a surprise to anyone who understands the games being played in that industry on a global basis.

Plant closures are almost invariably due to much more significant cost pressures - our higher standard of living, the legal framework, cost of transport, overseas subsidies, and - in a very large part - current global financial conditions. Caltex, as a trade exposed company was to receive transitional compensation for 95% of its emission costs. It's obvious that other factors, already mentioned in this thread and in the links provided, were the drivers for Caltex's decision. The CEO said so himself. Somehow I don't see him as a Labor stooge.
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Follow Up By: Member - John (Vic) - Thursday, Jul 26, 2012 at 22:30

Thursday, Jul 26, 2012 at 22:30
I have read extensively and am intimately involved in this subject more that you would believe.
I asked for empirical evidence and you have not provided any.
As for treasury modeling, hardly empirical in any aspect let alone unbiased or indeed accurate as has been shown a number of times.

As I said if you care to read what I stated, the CT adds to the cost base and will have been a factor that management considered, particularly as the subsidies you speak about are only temporary, same for the so called Gillard compo being handed out.
Three years and it all stops, business looks much further than 3 years down the track.

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Follow Up By: Bazooka - Thursday, Jul 26, 2012 at 23:11

Thursday, Jul 26, 2012 at 23:11
The evidence you require is in papers on the effects of carbon taxes already in place in other countries and states (including the conservative provinces in Canada). Summaries I've read suggest overall small negative impacts to bottom lines of some sectors balanced by many positive impacts in other areas of the economy. Treasury models no doubt incorporate such empirical evidence but you seem to think their financial modelling is hocus pocus. In that regard you'd be at one with Tony Abbott who has stated many times that he's an economic dunce. His policy on the MRRT is a perfect example of that.

As far as Treasury being biased - I guess if you say so it must be true. Are they biased politically, or do they have some hidden economic agenda to wreck the Australian economy? Their economic models are "inaccurate" as you say but they are as good as any in the world. Here's a tip - if you ever find an economic modeller who isn't "inaccurate" make sure you keep it a secret because you'll be sitting on information/advice worth a fortune.

It must grate that many large companies in Australia support carbon pricing and trading. If it was as devastating as you and your mates suggest what reason would they have for doing so I wonder? With the government apparently on the ropes you'd expect them to be reacting totally differently.
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Follow Up By: Member - John (Vic) - Friday, Jul 27, 2012 at 00:36

Friday, Jul 27, 2012 at 00:36
Thats the Canada that went to the election rejecting the implementation of a CT or ETS, as for the odd province that has a small limited scheme unlike our high priced and far more extensive scheme at much higher prices, not a realistic comparison is it.
Same goes for the very few other countries that currently have a ETS/CT, none are on the size or scale let alone priced at our ridiculous level.
Whilst a small economy compared to us NZ winding theirs back because of heavy negative economic effect.

Other than the Investment bankers trading in permits can you advise the many large companies that support the pricing and explain how happy they are about the fact they are prohibited from purchasing permits OS for a couple of dollars a tonne as opposed to our current $23 rising to close on $30 in three years time.
Didn't see Richard Goyder from Wesfarmers very happy about it recently, $160 million in CT that has to be found somewhere, his only option, screw his suppliers down harder and increase prices where he can.

The treasury hocus pocus is so good they were able to calculate the supposed cost increases to two decimal places huh!!
$10.20 cents wasn't it, that 2 bob was sooooo important to Swan hey!!
Nice of Treasury to oblige him.

As for being on the ropes, I don't know what you would call 28% primary vote then and caucus members pushing for the change to an ETS much sooner rather than later is not being done to be funny either.
Labor are totally paralysed and won't react in any expected sensible way, just look at the open borders they don't know what to do about for fear of upsetting their green coalition partners, add the CT and a number of other issues that will only be fixed by an election.

But back to Caltex, the guys at Kurnell and those from Kuri etc will be fine, they will be able to get one of the tens of thousands of green jobs that Gillard tells us are being created by the CT everyday won't they!


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Follow Up By: Allan B (Member, SunCoast) - Friday, Jul 27, 2012 at 08:40

Friday, Jul 27, 2012 at 08:40
John & Bazooka certainly have more detailed information about the Carbon Tax than I have.
However I do have some understanding of 'Straws Breaking Camel's Backs'.

And if you work for Treasury, with the Treasurer as your ultimate boss, you really would try hard to please him, now wouldn't you?

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Reply By: Michael ( Moss Vale NSW) - Thursday, Jul 26, 2012 at 11:15

Thursday, Jul 26, 2012 at 11:15
About 12 months ago, Caltex mumbled about closing but said at the time that they were profitable at the Kurnell refinery but they preferred it to be higher for their shareholders! A bit like the banks really but i don't think you can blame the carbon tax on this one. This is corporate greed alone!! Michael

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Follow Up By: rooster350 - Thursday, Jul 26, 2012 at 12:08

Thursday, Jul 26, 2012 at 12:08
I would suppose that if you or I , and especially I had 4 or 5 hundred thousand or more in shares in the company would we not be looking for the company to get the best possible return that they could on OUR money ?...it is a merry-go-round....if we all would take a deep breath and stop seeking more money then maybe the price of things would settle, and heaven forbid maybe even start dropping....maybe
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Follow Up By: AlbyNSW - Thursday, Jul 26, 2012 at 13:29

Thursday, Jul 26, 2012 at 13:29
It is there business and money so they are entitled to do what they please but it is not good for the nation to lose such critical facilities on our shores
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Reply By: Rockape - Thursday, Jul 26, 2012 at 14:05

Thursday, Jul 26, 2012 at 14:05
Landy,

For one I have never worried about the price fixing and will not in the future.

Would I be correct in saying that the refinery is now very old and not economical to keep maintaining.

Landy as you are in the industry would it also be correct to say the cost of building a new refinery in Australia is now the real issue. Guess the refined fuel will come in from overseas.

Lets face it, if we buy from regional centres the fuel all comes out of the same tanks with maybe a few chemicals sprinkled in at the depot to make it Ultra, Premium or Zoom Zoom.

I really agree with you about the security implications.

Have a good one.
RA.
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Follow Up By: The Landy - Thursday, Jul 26, 2012 at 14:33

Thursday, Jul 26, 2012 at 14:33
Hi Rockape

Well, not quite in the business, but I’m involvement with commodities, oil etc.

The Kurnell refinery is very old (50 years plus), and whilst it has had upgrades it simply is not cost effective when compared to the large refineries in South-east Asia and China. The cost of building a new refinery is massive and no company would commit to that type of expenditure to build a new one in Australia.

The reality is that a large percentage of our refined product is already being imported from offshore, and most, if not all the oil is imported as the oil from the Gippsland area does not suit the refineries in Australia.

Oddly enough, the Government does not seem concerned about the security implication of not having sufficient refining capacity in Australia. Perhaps it does not make a lot of difference if we are importing the oil, but intuitively I’ve always thought that a country like Australia should be self-sufficient if it needed to be, and this includes being able to produced refined fuels.

But like most things it won’t be an issue, until it is, and then it will be far too late.

As for the carbon tax, mentioned in posts by others above, it would have had no bearing on this decision, this is about risk/reward/return for shareholders. There is no return in refining fuel unless you have a large economy of scale, which we don’t.

Cheers....The Landy
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Follow Up By: Allan B (Member, SunCoast) - Thursday, Jul 26, 2012 at 14:36

Thursday, Jul 26, 2012 at 14:36
RA, Certainly the ongoing maintenance costs of an ageing refinery are critical to assessing its economic viability, but the major consideration is the inefficiency of a small refinery compared to those giant refineries of Asia. For example, the Jamnagar refinery in India has a production that far exceeds the total output of all current Australian refineries.

This same scenario has occurred with other Australian industries and will continue, in accordance with the population and commercial growth of Asian industries.
It is the New World!

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Reply By: Robin Miller - Thursday, Jul 26, 2012 at 15:03

Thursday, Jul 26, 2012 at 15:03
I have tried to think about what direct implications it will have on us as the motoring public.

I come down of the side of fuel costs would be lower in the medium term.
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Follow Up By: Allan B (Member, SunCoast) - Thursday, Jul 26, 2012 at 15:13

Thursday, Jul 26, 2012 at 15:13
I really doubt it Robin, but maybe some future price escalation may be moderated.

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Reply By: Member - mechpete - Thursday, Jul 26, 2012 at 16:05

Thursday, Jul 26, 2012 at 16:05
An oil company struggling to make ENOUGH money ,
you would also have to believe in the tooth fairy ????,
prepared to get screwed again ,
mechpete
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Follow Up By: Member - Leigh (Vic) - Thursday, Jul 26, 2012 at 16:19

Thursday, Jul 26, 2012 at 16:19
Fuel buddies will only grow in popularity as the big trips are undertaken. As for the kids, well a head mounted solar panel and a bike should care of their needs based on current observations. Just as long as I can buy it!
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Follow Up By: Allan B (Member, SunCoast) - Thursday, Jul 26, 2012 at 16:21

Thursday, Jul 26, 2012 at 16:21
So, if Caltex were making a satisfactory profit from the Kurnell refinery, they would close it down? Aww, c'mon pete.

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Follow Up By: The Landy - Thursday, Jul 26, 2012 at 17:14

Thursday, Jul 26, 2012 at 17:14
Well actually Caltex isn't an oil company, up until now it has been a refiner, but moving forward they will be marketer of fuel only.









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Reply By: Member - mechpete - Thursday, Jul 26, 2012 at 17:38

Thursday, Jul 26, 2012 at 17:38
if the share holders are not happy , they do what ever it takes to please
them , the price of crude oil per barrel doesn,t reflect the price at the bowser ,
more so these days
mechpete
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Reply By: 4running - Thursday, Jul 26, 2012 at 20:21

Thursday, Jul 26, 2012 at 20:21
hi all, I worked as a seafarer for a shipping company that was contracted by caltex and we delivered fuel products (deisels, unleadeds,crude etc) to the kurnell refinery. there was talk of this happening so Im not surprised. There was also a lot of talk that the Brisbane Caltex was also going to shut down its refinery so my guess is that in the next few years this will happen also and we will be totally reliant on imported fuel products.
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Reply By: pop2jocem - Thursday, Jul 26, 2012 at 23:18

Thursday, Jul 26, 2012 at 23:18
Here in good 'ol Wait Awhile (WA) we have what is probably the smallest refinery in Oz, namely the BP refinery south of Perth (Kwinana). One of my sisters-in-law works for a large labour hire company that has been asked to supply about 500 workers from various trades to upgrade facilities. Apparently the refinery is to shut down for several weeks while work is carried out. Looks like some companies can still make a dollar out of the oil refining business.
The matter of the dreaded Carbon Tax confuses me no end. Industries and individuals disadvantaged by it can get some sort of compensation package, at least for some time. I guess this will tide them over until they can "restructure" their pricing i.e. pass the cost on down the line to the end user.
I must have missed something. This is going to reduce our carbon footprint how?

Oh!! silly me... simple answer.... all those nasty polluters move overseas to a country not as environmentally responsible as us.

Hang on....aren't we all living on the same planet? Oh well... at least we can say it wasn't us.....Lol.

Cheers
Pop
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Reply By: philw- Friday, Jul 27, 2012 at 16:51

Friday, Jul 27, 2012 at 16:51
Oh come on people. The Carbon Tax is just warming us up for the big one. The Oxygen Tax. Why not sell off refineries? We've sold everything else. The cars you drive,the computers you use,the clothes you wear,every electrical appliance in the home,your kitchenware,your gas,water and electricity and most of the food that you eat are already produced overseas. Lucky country,my arse.
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