Australian refiner Viva Energy said today it will apply for taxpayer aid after margins at its 120,000 b/d Geelong refinery in Victoria fell by a third in July-September.
Viva expects to receive about A$24mn ($16mn) in federal government support under Canberra's Fuel Security Services Payment (FSSP). It will draw on the payment for the first time since July-September 2021, when it received A$12.45mn in subsidies.
The funds will raise the Geelong refining margin (GRM) by $1.50/bl to $7.90/bl for July-September, putting it above breakeven levels, Viva said on 22 October. But the payment must still be confirmed by the government.
The FSSP compensates refiners during lossmaking periods. It was established as part of a six-year federal fuel security package beginning 1 July 2021.
Refiners become eligible for the FSSP when margin markers fall to A$10.20/bl, with a maximum of A1.8¢/litre available when the marker drops to a floor of A$7.30/bl.
The government established the FSSP after BP closed its 146,000 b/d Kwinana refinery near Perth, Western Australia in March 2021, and ahead of ExxonMobil's shutdown of its 90,000 b/d Altona refinery in Melbourne, Victoria in August of the same year.
Australia only has two remaining refineries — Geelong and Australian firm Ampol's 109,000 b/d Lytton refinery in Brisbane, Queensland — which together can produce enough to meet about 22pc of Australia's oil product demand.
Viva's total sales in July-September fell by 2pc on the quarter but rose on the year. Sales volumes increased by 4pc year on year in the firm's commercial and industrial fuel division and by 1pc in its convenience and mobility sector.
Viva commissioned three 30mn l (189,000 bl) diesel fuel storage tanks in September, which were funded under Canberra's policy to boost diesel storage to help meet its IEA strategic reserve commitments. The tanks have enough storage capacity to supply Victoria state's diesel demand for one week, Viva said on 4 October.
Viva also commissioned a bitumen export line during the quarter and recently completed the first locally produced bitumen shipment from Geelong to Sydney.
Refining is expected to remain challenging for the rest of 2024, Viva warned, echoing comments from Ampol in its July-September results. Run cuts and maintenance could rebalance global refining capacity and provide some support, Viva said.
| Viva Energy results | (b/d) | ||||
| Jul-Sep '24 | Apr-Jun '24 | Jul-Sep '23 | q-o-q % ± | y-o-y % ± | |
| Refining intake | 110,000 | 114,000 | 66,000 | -4 | 66 |
| Sales | 285,000 | 291,000 | 276,000 | -2 | 3 |
| GRM ($/bl) | 6.4 | 9.6 | 8.5 | -33 | -25 |
| Source: Viva Energy | |||||
