World News – AU – Viva grabs the lifeline for subsidies for the Geelong refinery

Oil refiner Viva Energy has used the federal government’s accelerated rescue efforts for the sector as a lifeline for its loss-making Geelong refinery, says it will participate in the subsidy program to help keep the facility afloat.

The « refinery production payment » announced by Energy Secretary Angus Taylor on Monday of at least 1 ¢ per liter will add approximately $ 30 million to the refinery’s underlying earnings for the first half of 2021, Viva said on Monday.

The payment, along with the other government fuel safety measures announced in September, provides « material assistance that underscores the importance of domestic refining to the overall fuel safety of the country and to the local communities where our domestic refineries operate » said chief executive Scott Wyatt.

He said Viva will work with the federal government on the details and funding mechanisms of the long-term fuel safety measures « which we expect to provide the support Viva Energy needs to keep the refineries going beyond the completion of the interim period. « Refine Production Payment ».

The emergency acceleration of subsidies is intended to help prevent further closings of oil refineries. BP decided in October to close its Kwinana plant in Western Australia and all three other refineries in Australia that are currently under review.

The subsidy starts on 1. January and lasts six months before a long-term subsidy measure starts on January 1. July is expected.

All four refineries have suffered heavy losses this year due to the COVID-19 pandemic, which depressed demand for aviation fuel and gasoline in particular, and lowered refining margins.

Viva expects « persistent weakness » in margin refining, which affects the viability of the Geelong mill, Wyatt said.

Ampol, the owner of the Lytton refinery in Brisbane, which is currently under review for a possible closure, has yet to respond to the government’s subsidy.

ExxonMobil, which owns the Altona refinery in Victoria, is currently reviewing the government’s support package.

The six-month subsidy from January to June 2021 would cost $ 83. 5 million, said Mr Taylor. Refinery gasoline, diesel and jet fuel will receive a minimum grant of 1 ¢ per liter to reflect the contribution they make to fuel safety in the Australian market. In return, the refineries must agree to continue operating their facilities for the duration of the program, commit to long-term self-help activities, and commit to an open book process to enable long-term support measures to be developed.

If fewer than three refineries participate in the subsidy program, payments to the others will increase, creating competitive tension in the market and increasing the incentive to continue operations.

The longer term package includes a competitive $ 200 million grant program to build an additional 780 million liters of diesel storage facilities, a minimum inventory requirement for essential fuels for transportation, and the ongoing production subsidy.

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Refinery, Oil Refinery, Angus Taylor, Petroleum, Australia