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Downstream Petroleum 2003

The recently released ‘Downstream Petroleum 2003’ gives a broad coverage of national issue related to refining and supply. It also summarises the trends in financial and business performance of the major oil companies.

The Australian Institute of Petroleum (AIP) released its report, Downstream Petroleum 2003, on 1 June 2004. The report gives a broad coverage of national issues, particularly those related to refining and supply. It also summarises the trends in financial and business performance of the major oil companies. At the launch of the report in Canberra, the newly appointed Chairman of the AIP, Mr Dave Reeves, said, "The Australian downstream petroleum industry has faced a rapidly changing environment that has threatened its financial viability over the past 10 years."

" Recently, profitability has improved, but the industry is notoriously cyclical and we need to lay a firm foundation now for a future that is inherently uncertain."

With the mothballing of the refinery at Port Stanvac, Australia became a structural importer. We consume the equivalent of 777,000 barrels of oil per day, which is more than 689,000 bpd of petroleum products we produce. Profits in refining are related to Singapore refinery margins. These margins recovered in late 2002 and continued to improve through 2003. At the same time, Asia-Pacific regional supply is tightening as demand catches up with supply.

Refiners expect a supply response to the improved refinery margins, but this does not necessarily mean a return to cheap Asian imports. The move to cleaner fuels in the region is likely to put upward pressure on wholesale prices.

World Refining Margins (Downstream Petroleum 2003)

Cleaner Fuels & Changes to Standards

The move to cleaner fuels in the region includes the ongoing changes to Australia’s national fuel quality standards. The first tranche of standards to 2006 is expected to require further investment by refiners of up to $1 billion.

The investment cost to meet standards after 2006 is less certain, however it is likely to be at least another $1 billion. The challenge for the refiners is to fund a sustained investment program when profits are highly variable.

Profits from & Investment in refining and marketing by the major oil companies in aggregate. (Downstream Petroleum 2003)

The report contains many more facts and illustrations that you will find useful for your own understanding of the industry. They can also help you answer some of your customers’ questions on topics such as supply security, petrol prices and payments by the industry to governments. It also has a summary of AIP publications, codes of practice and guidelines, and training and accreditation programs.

Copies of Downstream Petroleum 2003 (1.2Mb pdf) can be downloaded here: www.aip.com.au/pdf/Downstream_Petroleum_2003_Report.pdf

We know that the various organisations that represent the fuel industry do not always agree with each other. We don’t expect them to and we have reported the debates many times in Australian Convenience Store News. However, we think most would agree with the following statement by Gerry Hueston (then Chairman, AIP) in his introduction to Downstream Petroleum 2003.

“ The downstream petroleum industry is important to the Australian economy through a direct contribution to economic growth and supporting the development of fuel intensive industries such as farming, mining, construction and transport. It also provides other benefits through the reliable supply of high quality petroleum products for Australian consumers, significant employment across the nation, and technical expertise to the Australian community generally.”

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