Australia has reached a deal to keep its last two oil refineries open with up to A$2.3 billion ($1.8 billion) in support until 2030 to ensure the country's long-term fuel security amid tough competition from Asian refineries.
The package will help Ampol Ltd (ALD.AX) and Viva Energy Group (VEA.AX) keep their refineries open until at least 2027 and save 1,250 jobs across the two plants, Prime Minister Scott Morrison said.
Investors applauded the big subsidies, sending Ampol's shares up nearly 10% and Viva's shares up as much as 9%.
"This is a key plank of our plan to secure Australia's recovery from the pandemic, and to prepare against any future crises," Morrison said in a statement.
The package includes up to A$125 million each to Ampol and Viva to upgrade their refineries to produce ultra-low sulfur petrol. In return, the companies have agreed to start making the new cleaner fuel by end-2024, nearly three years earlier than planned.
Viva Energy Chief Executive Scott Wyatt said securing the deal was a "huge relief," and said he was glad that Ampol, which had been reviewing the future of its Lytton refinery, had decided to keep the plant open.
"It retains a material critical mass of refining capacity across the two sites and I think that allows us to continue to work closely with government on not just the future of refining but the whole energy transition," Wyatt told Reuters.
Australia's four refineries were just emerging from years of losses when the pandemic hit fuel demand last year, aggravating the pain of competing against Asia's mega refineries. Combined, the four plants had a capacity of 464,000 barrels per day, dwarfed by Asia's biggest refinery, the 1.24 million bpd Jamnagar plant in India.
Pandemic-induced supply disruptions in other industries sparked fear over long-term fuel security in Australia and spurred the government last year to offer huge subsidies to shore up the four plants.
However BP plc (BP.L) has since shut its Kwinana plant in Western Australia in April and Exxon Mobil Corp (XOM.N) is set to close its Altona plant in Victoria later this year.
Viva and Ampol have committed to keep their refineries open until at least 2027, with an option to receive support to 2030.
Both plants will be aided when refining margins drop below an agreed level and will not receive help during good times, Energy Minister Angus Taylor said, adding the government does not expect to spend the full A$2.3 billion.
($1 = 1.2857 Australian dollars)
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Australia to shore up last two oil refineries with up to $1.8 bln - Reuters
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