Australian refining to remain challenging: Viva

Australian refiner and marketer Viva Energy expects trading conditions for its 128,000 b/d Geelong refinery in Victoria to remain challenging this year with the continued impact from the Covid-19 pandemic.

Viva is the only refinery operator in Australia to accept the federal government's interim production subsidy, known as the fuel security package, to keep Geelong operating. BP and ExxonMobil are to close their respective refineries in Australia this year, while Australian downstream firm Ampol said it is still reviewing the long-term outlook for its 109,000 b/d Lytton refinery.

Refining is expected to remain challenging during 2021, with the longer term outlook dependent on the outcome of the fuel security package, Viva said.

The refining industry plays a vital role in Australia's economy, and the firm is working closely with the Australian federal government to implement a long-term fuel security package that will provide important support to the refining sector, it said. But Viva has still not ruled out the closure of Geelong. "We plan to resolve the refinery's business for the long term this year," said Viva chief executive Scott Wyatt.

Viva is also progressing a number of projects at Geelong that have potential to transform the site into a strategic energy hub and support the firm's longer term aspirations to expand into other forms of energy such as natural gas, hydrogen and renewable electricity.

"These have potential to diversify earnings in this part of our business, and together with the benefits expected from the fuel security package, help improve the long-term sustainability of the refining business," Wyatt said.

"We feel optimistic about finding a long-term solution to the fuel security package."

Viva reported profit on its preferred metric of a replacement cost (RC)

basis of A$143.4mn ($114mn) in 2020, down by 4.6pc from A$148mn in 2019. Viva would have booked a loss for 2020 without a one-off significant item profit of A$179.3mn, reflecting the sale of its 35.5pc stake in Viva Energy REIT that owns some of Viva's retail fuel network.

"We are working to return the refining business to positive earnings in the short term, and aim to achieve minimum sustainable returns over the long term," Wyatt said.

Viva has budgeted capital expenditure of A$185mn-210mn in 2021 against spending of A$159mn last year and A$161mn in 2019.

By Kevin Morrison