BP is mulling a $3 billion sell-off of its Australian refineries and petrol stations

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BP considers sale of $3bn Aussie downstream assets

Written on the 18 December 2013 by Australian Financial Review

London-listed BP is mulling a $3 billion sell-off of its Australian refineries and petrol stations, joining a growing list of oil giants reassessing their involvement in the industry.
A divestment of BP’s downstream assets was discussed as far back as 210, when it was thought costs associated with the Gulf of Mexico disaster would prompt the global energy giant to consider an asset sale.

BP’s chief economist told The Australian Financial Review in February 2012 that the future of the refining industry was dire, with excess global capacity and the rise off alternative fuels sounding the death knell for many existing plants.

Analysts have weighed in, pointing out that Australian refineries are smaller, older and less complex than their international peers which can take a variety of crudes. The strong Aussie dollar has added to the pain.

Caltex Australia has since shut its Kurnell refinery and weighted its business towards marketing. Shell, which has already closed its Sydney refinery, has meanwhile put its ageing Geelong plant up for sale.

If BP, Europe’s second-largest oil and gas company which runs two of Australia’s six refineries, was to bite the bullet and formally appoint advisers, it may look towards its lending bank syndicate which includes Deutsche Bank and UBS.

The unconfirmed rumour doing the rounds is that BP has held back from $50 million of spending needed at its Bulwer Island refinery in Brisbane, seemingly confirming its lack of interest in throwing money at the plants. The Brisbane plant has long been seen as a prime candidate to link up with Caltex’s Lytton plant, just 300 metres away, but no deal has yet been done.

BP’s Kwinana refinery in Western Australia is better placed competitively but faces the same broader difficulties.

Credit Suisse estimates Caltex’s refining losses reached about $150 million this year, signalling BP’s losses may be similar.

Elsewhere, Regional Express is among the parties that have expressed interest in buying Brindabella Airlines, which was placed into receivership on Sunday. Brindabella has licences over five monopoly routes to regional towns in NSW which would complement the Rex network. However, it is unclear if Rex is a serious buyer of the business, which Commonwealth Bank took out a fixed and floating charge over the assets in exchange for a $4.6 million loan. Rex is separately urging the NSW government to take the valuable licences of Brindabella, which would open the way for Rex to apply to fly the routes itself.

Recreated from The Australian Financial Review 18/12/2013