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LONDON (Alliance News) - BP PLC Wednesday announced that it intends to halt refinery operations at its major Bulwer Island refinery in Brisbane, Australia by mid-2015, as the Australian operations of major commodities players continue to struggle.
The oil and gas major said the growth of very large refineries in the Asia-Pacific region was driving structural change within the fuels supply chain in Australia and putting significant pressure on smaller scale plants.
?It?s against this background that we have concluded that the best option for strengthening BP?s long-term supply position in the east coast retail and commercial fuels markets is to purchase product from other refineries," BP Australasia President Andy Holmes said.
The company said that in order not to disrupt customers, it has already made alternative supply agreements including the import of jet fuel and a long-term agreement for the provision of motor spirit and diesel from the nearby Lytton refinery.
BP currently employs some 380 staff at the refinery, and between now and mid-2015 this is expected to fall to around 25.
The news comes as other major commodities players have struggled in Australia, with losses being booked at refineries due to the strong Australian dollar, tighter fuel quality standards, and the development of large refineries in Asia reducing their competitiveness.
Royal Dutch Shell PLC recently reached a binding agreement to sell its Australia downstream businesses, including its Geelong Refinery, to Dutch-owned oil trader Vitol for a total transaction value of around AUD2.9 billion. The deal is expected to close in 2014.
However, the sale did not include its Aviation Business or its lube oil blending and grease plants in Brisbane, which are expected to be converted to bulk storage and distribution facilities.
In February, Shell said that its upstream operations in Australia are not impacted by the deal and it plans to continue to invest in Australian upstream assets.
At the time, Shell's Chief Executive Officer Ben van Beurden said: "Australia remains important to Shell, but we are making tough portfolio choices to improve the company's overall competitiveness. Our customers will continue to benefit from the quality associated with the Shell brand."
Also last month, Glencore Xstrata PLC said it is planning to suspend operations at its Ravensworth underground coal mine in Australia, due to lower coal prices, high production costs, the strength of the Australian dollar, and geological problems in future mining areas.
BP shares were up 0.5% to 486.50 pence. Shell shares were down 0.3% to 2,203.50p. Glencore shares were up 0.5% at 311.00p.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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