SYDNEY (REUTERS) - Royal Dutch Shell put its Geelong oil refinery in Australia up for sale as mounting competition from Asia and reduced margins hammer the country's crude processors.
The refinery could be converted into an import terminal if no buyer is found, said Mr Andrew Smith, vice-president of downstream operations for Shell Australia, adding that the move was part of Shell's strategy to focus investment on larger sites.
"Shell has a rich portfolio of opportunities and there is a competition for capital for those opportunities and in the world we are in Geelong just can't compete for that capital," Mr Smith added.
The 120,000 barrels per day (bpd) Geelong refinery has been operating for 55 years and supplies about half of the Australian state of Victoria's fuel.
It takes crude oil from Vietnam, Malaysia, Brunei and Indonesia as well as Algeria, Gabon, United Arab Emirates, New Zealand, and Australia.
Some traders were doubtful on the chances of a buyer being found for Geelong, which employs about 470 people.
"If Shell cannot upgrade the refinery, no one can," a trader with a Southeast Asian refiner said.
STRING OF REFINERY CLOSURES
Australia is one of Asia's biggest importer of fuels, and a growing number of its ageing refineries are being shut.
If Geelong shuts, including two other refinery closures announced last year Australia's refining capacity is set to drop by nearly 40 per cent to 408,600 bpd by 2015.
Along with competition from newer Asian facilities, owners of the refineries are grappling with higher global oil prices, a drop in Australian crude output, as well as rising labour and financing costs due to a strong local dollar.
Mr Smith said Shell has been disposing of refineries that no longer meet its investment criteria, citing the 2011 sale of its 270,000 bpd Stanlow refinery in Britain to Essar Oil Ltd.
The company last September also said it was closing another refinery in Australia, its 79,000 barrels-per-day Clyde Refinery near Sydney.
Caltex Australia also plans to close in 2014 its 57-year-old Kurnell refinery, which has a capacity of 124,500 bpd. Both refineries will be converted to import terminals.
Analysts have said the 108,600-bpd Lytton plant, also operated by Caltex, and Exxon Mobil's 80,000-bpd Altona refinery remain vulnerable to closure, although both firms have said they will continue operating these plants.