Viva Energy Eyes Closure Of Geelong Refinery

Investors seem to be fairly relaxed by the threat from Viva Energy to shut its Geelong oil refinery (it’s the old business operated by Shell).

Viva Energy told the ASX yesterday in a Victorian trading update that it may have to permanently close the Geelong refinery significantly reduced demand for fuel continues to cause problems.

In the update, Viva, which also operates a national network of Shell-branded petrol stations, said it was assessing the possibility of moving to a “full shutdown” of the facility. The plant employs approximately 700 workers.

Viva shares eased by just 0.3% to $1.595 on the news on Monday.

COVID-19 and the related restrictions on both international and local travel have hit local refineries such as Geelong. Rival Ampol (nee Caltex Australia) brought forward a big maintenance spend on its Lytton refinery in Brisbane at the start of the lockdowns.

Demand for petrol, distillates, and especially jet fuel have been cut by the lockdowns, with the latter likely to be a long term concern.

This saw the Geelong refinery turn in a $50 million loss last month and is currently operating at reduced capacity whilst undergoing maintenance works.

Viva said full production could resume at the plant by mid-November if the Victorian government’s roadmap out of stage four restrictions happens.

But CEO Scott Wyatt said the extended restrictions could still affect the company’s plans.

“Unfortunately, the impacts of COVID-19 and the restrictions on mobility and the economy are putting extreme pressures on the refining business that we have not experienced before and are not sustainable over the longer term.”

“We are closely monitoring the evolving situation and will continue to keep our employees, investors, and stakeholders updated,” he said.

Outside of its refining business, Viva said its service station segment continued to be resilient and its expected volumes in Victoria would recover as restrictions are eased.

Viva will update investors on its plans for the refinery next month.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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