After undertaking a 12 month review of its oil refining operations, Caltex Australia today announced, subject to consultations with its workforce, that it was proposing to cease its oil refining operations at Kurnell, replacing them with an import and fuel storage facility, a process that would take approximately two years.
Caltex’s review of its refineries, which were built in the 1950s and 1960s, focused on options for improving competitiveness. By today's standards they are small compared to the mega refineries in our region, for example the capacity of the Jamnagar refinery in India is larger than the total capacity of Australia’s six refineries.
The review concluded that investment to bring the Kurnell refinery to a sustainably competitive position was not economic. The review did identify a number of affordable investments in the Lytton refinery in Brisbane that would support sustained improvement, which I am pleased to say are under development by Caltex.
Caltex has advised that it will not be seeking government assistance, as no realistic amount of government assistance would allow Kurnell to overcome its competitive disadvantage.
Caltex has clearly stated that the introduction of the carbon price was not a factor in the decision to close the refinery.
I understand this is an anxious and difficult time for many Caltex workers and their families. This decision will affect the approximately 430 Caltex employees at the Kurnell refinery and an additional 300 contractors. In the first two years, there will be a limited reduction in employee numbers to ensure the full operation of the refinery.
I am reassured Caltex management will identify redeployment opportunities for workers wherever possible. The Government will work with Caltex to develop an approach which integrates Government and Caltex programs.
The skills these workers have obtained in the workplace are invaluable. Workers in oil refineries are highly trained, whose skills will be in great demand in other parts of the industry such as LNG processing plants.
I welcome the company’s commitment to ensuring workers receive their full entitlements and the additional outplacement services offered to workers, including helping staff with further training.
The closure will not jeopardise Australia’s energy security as Australia already imports large amounts of crude oil and finished petroleum products- the Kurnell refinery primarily relies on imported crude oil. This decision will see imported supplies of crude oil being replaced by imported refined product. Additionally, the closure will not affect fuel prices, which are already determined by imported refined product and domestic competition
The Government encourages Caltex to engage effectively with all employees and affected local communities to lessen the impact of this closure.