Caltex Australia on Thursday said it will close its base oil refinery at Kurnell in Sydney to cut costs and improve efficiency. The 3,300 barrels per day API Group I plant is the last one in Australia.
The Chevron subsidiary stated the Kurnell refinery is not viable going forward due to the fact that the plant manufactures outmoded lubricant products and faces declining feedstock sources. A decision has been made to close [the refinery] with further detailed work to be done to determine a precise date for closure.
The refinery has been in operation since 1964 and currently has 85 employees, said Caltex Australia spokeswoman Georgie Wells.
Wells told Lube Report that the reasons for closing the refinery included the poor outlook for lubricating oil refiner margins, high costs because the 3,300 b/d capacity is considered well below the level required to achieve economies of scale, and poor suitability of alternative feedstock – Arab light – for the fuels refinery.
The Kurnell refinerys closure is not expected to affect Caltex Australias lubricating oil customers, as we will ensure secure, long-term important arrangements are in place to replace [the refinerys] base oil supply, Wells continued. We will also ensure Caltex can continue to supply customers with bitumen.
Wayne Petersen, business development manager with Melbourne-based Hilditch Pty Ltd., an independent international trading company, provided an overview of Australias lubricants and base oil markets at the ICIS Asian Base Oils & Lubricants Conference in June 2009. Estimates of Australias lube market range from 420,000 to 450,000 metric tons per year, Peterson said.
He noted that rationalization had impacted Australias lubricant manufacturing, and its base oil refineries, with the country now importing most of its base oil. In 2002, four refineries had combined capacity to produce 790,000 tons per year of base oils. By 2009, he said, Caltex Australias Kurnell refinery was the last one.
Petersen pointed out that a big change in base oils in Australia was the move from API Group I to Group II, driven by the latest engine oil specifications and emission requirements.