Monday, April 11, 2011

Shell Plans to Turn Refinery Into Terminal

The Australian arm of Royal Dutch Shell PLC said Tuesday it plans to stop refining at a plant near Sydney and convert the operation into a terminal for fuel imported from around the region.

The relatively small Clyde Refinery can't compete with the "mega-refineries" going up in Asia and elsewhere, which have led to overcapacity in the industry, said Andrew Smith, vice president of Shell Australia's downstream portfolio. He denied the decision had been prompted by government policy or a proposed tax on carbon emissions.

The company will immediately begin consultations with employees, Mr. Smith said; the boards of two local business units then decide whether to convert the terminal, with a decision expected within weeks. He said that if the plans are accepted, the transition would be done by mid-2013, when the refinery had been scheduled for maintenance.

"Clyde is no longer regionally competitive," Mr. Smith said during a conference call with reporters. "The proposal would secure its long-term future."

Shell acquired the 75,000 barrel-a-day refinery in 1928. It currently supplies about 40% of Sydney's petroleum and nearly half of the requirements of New South Wales state, refining crude oil received from the Gore Bay terminal. Shell's other Australian refinery, near Melbourne, can process up to 120,000 barrels of oil a day.

The Clyde operations employ about 310 people, while a typical terminal employs between 30 and 50 people, Mr. Smith said. If the conversion goes ahead, he said, Shell would look to redeploy workers where possible.

Martin Ferguson, minister for resources and energy, said in a statement that Shell's proposal wasn't related to the government's plans to price carbon. "The decision by Shell to examine this proposal has been taken for a range of commercial reasons," he said.

The government plans to start pricing carbon with the aim of cutting emissions and pollution and boosting investment in renewable energy and low-carbon industries from July 2012, subject to the federal parliament's passing the legislation. Details of the plan haven't been finalized.

Source http://online.wsj.com/article/SB10001424052748704529204576257832586113442.html?mod=googlenews_wsj