Lifeline for Ampol (ASX:ALD) & Viva Energy (ASX:VEA)'s oil refineries

Company News

by Michael Luu

The Department of Industry, Science, Energy and Resources is set to implement a $2.3 billion stimulus package for the energy sector to rescue Australia’s battered oil refining industry and maintain the country’s self-sufficiency in oil production.

The support package will be a lifeline for Australia’s two remaining oil refineries, which are operated by Ampol (ASX:ALD) and Viva Energy (ASX:VEA) in Geelong and Brisbane.

The past decade has witnessed the shutdowns of four major oil refineries, due to increased competition and pandemic-related challenges.

During this time, international oil processors have taken advantage low operational expenses in developing countries to eliminate Australian oil-refining players. Australian oil consumption has since then grown more dependent on foreign imports.

The COVID-19 pandemic also took a heavy toll on demand for oil, as usage of petrol-based vehicles and traveling activity reduced sharply during social distancing efforts to quell infections.

This forced ExxonMobil and BP to decommission oil-processing facilities in Victoria and Western Australia.

The alarming circumstances led energy suppliers Ampol (ASX:ALD) and Viva Energy (ASX:VEA) to plead for help, as discussions with the government were underway for months.

The negotiating parties finally agreed on a subsidy of 1.8 cents for every liter of locally made fuel. Furthermore, the government will dedicate $50.7 million of its budget spending plan to facilitate the minimum stockholding requirement of 24 days for petrol and 28 days for diesel fuel.

Viva Energy welcomed the government subsidy, ““Today’s announcement by the federal government provides important and welcome structural support”.

Ampol said, “The outcome will also allow Ampol to progress alternative future energy uses for this strategic site, preserving manufacturing skills that will be critical for success in the energy transition.”

The payment package has allowed the ASX-listed fuel manufacturers to announce their plan to extend the the lifespans of their oil-processing facilities by another six years to FY27. This effectively means over 1200 personnel will secure employment for the lengthened duration.

Shares in Ampol (ASX:ALD) are trading 6.4 per cent higher at 27.54, while shares in Viva Energy (ASX:VEA) are tracking over 7 per cent higher at $2.13