Australia's Ampol is reviewing its refinery operations because of "highly uncertain" market conditions for refining in Asia-Pacific.
Refiner and marketer Ampol, formerly known as Caltex Australia, said it expects uncertainty to continue for the foreseeable future because of the impact of the Covid-19 pandemic, which has depressed demand for jet fuel in particular.
Ampol operates the 109,000 b/d Lytton refinery in Brisbane, Queensland. The company confirmed plans for the refinery to restart next month after extended maintenance, with full production expected in October.
Ampol is the second Australian refiner to announce a review of its operations in as many weeks. Viva Energy said last week it was considering the long-term viability of its 128,000 b/d Geelong refinery in Victoria, as margins are hit by slumping demand and regional overcapacity.
Lytton and Geelong are two of only four refineries in Australia. The others are ExxonMobil's 90,000 b/d Altona refinery in Melbourne and BP's 140,000 b/d Kwinana plant in Perth. The four refineries' combined capacity of 449,000 b/d is less than half of Australia's consumption.
Ampol closed its 135,000 Kurnell refinery in Sydney in 2014 and converted it into an oil product import terminal. This leaves Kurnell well placed to participate in the Australian government's potential strategic crude and oil product reserve initiative that is targeting the addition of 7mn-15mn bl of storage capacity.
Ampol booked a pre-tax impairment charge of A$80mn ($57.4mn) on Lytton in January-June this year because of the impact of Covid-19 on transport fuel demand and weaker refiner margins. The Lytton write-down is part of a total group impairment charge of A$355mn in the period, of which A$233mn reflected its retail assets.
Ampol's preferred metric, net profit on a replacement cost of sales basis, does not include the impairment charges. The company reported a profit A$120mn on this basis in the first half of 2020, down from A$135mn in the same period in 2019. This was the lowest first-half profit for Ampol in more than seven years. Revenue fell to A$8.06bn in the first half of 2020 from A$10.31bn a year earlier.
Diesel demand remains resilient, underpinned by the mining sector, while jet fuel is hardest-hit product, the company said.
| Ampol results | |||
| Jan-June 2020 | Jan-June 2019 | Change % ± | |
| Total fuel sales volumes (bn litres) | 9.9 | 9.6 | 4 |
| Australian volumes (bn l) | 7.0 | 8.1 | -14 |
| International volumes (bn l) | 2.9 | 1.5 | 93 |
| Lytton sales volumes (bn l) | 2.0 | 2.9 | -29 |
| Lytton refined production (bn l) | 2.0 | 3.0 | -34 |
| Lytton profit before interest, tax (A$mn) | -59 | 1 | n/a |
| Source: Ampol | |||
