Caltex to temporarily close refinery on Covid-19 hit

As the world continues to try and contain the spread of Covid-19 and fuel demand slumps globally, large fuel companies are starting to feel the hit.

Caltex Australia this week announced they were bringing forward planned shutdown and maintenance of their Lyntton refinery in Brisbane to next month and it will remain shut until “margin conditions have suffientlty recovered.”

In a statement to the ASX, Caltex said the measures were aimed at protecting the business as they navigated the unprecedented and challenging period, including the reduced cash flow at the refinery due to current weak refiner margins.

“This decision will result in an improved economic outcome and protect cash flows, while demonstrating our ongoing commitment to the Lytton refinery. At the same time, by taking this action now, we will continue to ensure the safe and reliable supply of high-quality transport fuels. Caltex supplied over 20 billion litres in 2019 and we will continue to work closely with our customers and government agencies to ensure our supply chain remains resilient,” Caltex’s interim CEO Matthew Halliday said.

Caltex also flagged a 80-90 per cent drop in fuel demand, a 30-50 per cent drop in retail gasoline and 10-30 pe cent in diesel compared to 2019.

Viva Energy Australia are also predicting a slump in aviation fuel demand up to 90 per cent and has already seen a decline in alliance sales between 30-40 per cent since government regulations surrounding Covid-19 were introduced in late March.

Their refinery has already reduced jet fuel production and VEA have said further steps may be taken to reduce gasoline production if necessary. Scheduled maintenance of their Geelong refinery, which was to begin in August, is also being reviewed.

While it’s presenting challenges for fuel companies, consumers are starting to see a drop in price at the bowser. Figures from ORIMA Research prepared on behalf of the Australian Institute of Petroleum show the average national price of unleaded has dropped from a peak on January 19 of $1.54cpl to $1.20cpl on April 5.

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