Viva Energy Group has reported a $30 million loss from its Geelong refinery in the September quarter, leading the company to consider its long-term viability.
This news comes following Ampol’s announcement that it would be conducting a comprehensive review of its Lytton refinery, after it ran at a loss of $82 million in the September quarter.
Viva Energy’s Geelong Refining Margin (GRM) continues to be impacted by weak regional refining margins, reduced market demand and lower production.
A major maintenance program, that is due for completion at the end of October, has also impaired production during this period.
Lower crude premiums in the September quarter have provided some uplift to margins, but the company is incurring unsustainable operating losses.
It’s hoped that the resumption of full refining operations from early November, the deferment or cancellation of all non-essential capital and operating expenditure, and the Federal Government’s Fuel Security Package and proposed refinery production payment, will help to import cash flow and near-term profitability.
But the long-term outlook for the Geelong refinery remains uncertain due to the significant decline in global demand for oil products, which is likely to weigh on regional refining margins through 2021.
Viva Energy will evaluate the future viability of the refining business and will provide a decision on its continued operations beyond the first quarter of 2021 in December.
Retail recovers from coronavirus hit
Viva Energy’s retail business has recovered from the impacts of coronavirus restrictions earlier in the year, which saw a drop in demand and petrol prices fall to a record low.
For the September quarter, excluding Victoria, the Alliance network had sales volumes of 52.3 million litres per week, up 14 per cent from the June quarter and in line with the same period last year.
However, Victorian petrol sales took a hit, declining by around 37 per cent as a result of stage four restrictions, however the business is benefitting from stronger retail fuel margins compared with the prior year, and it well positioned for recovery of sales volumes as restrictions are eased across the state.
The commercial business is performing in line with the same period last year, with total diesel sales down just three per cent. But aviation sales volumes remain impacted and are down 76 per cent year on year. It’s expected that this will begin to improve as domestic travel demand recovers and border restrictions are further relaxed.