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

[csv8]

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

[deesun]

More industry headed offshore and an airline which had a monopoly on five routes still cant make ends meet.

[Road_Warrior]

Hell will freeze over before the government allows the Kwinana refinery to close. If BP sells it, an independent will pick it up.

[mik]

A familiar story of late, one has to wonder how this will play out for the price of fuel in a few years if they close up shop, and will we suffer shortages if it hits the fan over seas?

[jpd80]

Originally Posted by Road_Warrior

Hell will freeze over before the government allows the Kwinana refinery to close. If BP sells it, an independent will pick it up.

If Shell and BP can source their refined products more cheaply over seas, then you can be assured
that independents (who buy their products from the majors) will also benefit, no one wants
to own small refineries, they're just not economical anymore...


it's so simple for them to do, just switch off refineries and just replace imported crude with
imported refined products, all refineries complexes then just become import terminals.

[Road_Warrior]

Originally Posted by jpd80

If Shell and BP can source their refined products more cheaply over seas, then you can be assured
that independents (who buy their products from the majors) will also benefit, no one wants
to own small refineries, they're just not economical anymore...


it's so simple for them to do, just switch off refineries and just replace imported crude with
imported refined products, all refineries complexes then just become import terminals.

There's only one refinery in WA and that's Kwinana. They have the industry by the balls here and they know it.

Importing product from Asia or the Middle East isn't new as the independent I was working for at the time was doing it regularly, but supply of refined product from overseas was sometimes volatile due to global market forces, security/instability in the regions it came from and the consistency of the product was an issue as I recall.

That and the Kwinana refinery can provide a whole host of products and lubricants you simply can't bring in on one tanker.

[chevypower]

Wouldn't fracking in Australia warrant refineries? Also dimethyl ether looks like a good alternative to diesel. I believe one of the keys to a country's economic success is good energy policies that lower the price.

[GASWAGON]

Originally Posted by chevypower

Wouldn't fracking in Australia warrant refineries? Also dimethyl ether looks like a good alternative to diesel. I believe one of the keys to a country's economic success is good energy policies that lower the price.

Well ye maybe they should spend some money and turn a few plants into LPG refining plants instead of sending the gas offshore for refining then bringing it back.....If they could keep the pump prices reasonably low the LPG may be able to save itself???

[DJR-351]

Originally Posted by EF_6

Well ye maybe they should spend some money and turn a few plants into LPG refining plants instead of sending the gas offshore for refining then bringing it back.....If they could keep the pump prices reasonably low the LPG may be able to save itself???

Australia does not send any gas (LPG or LNG) overseas for refining and bring it back......

LPG occurs naturally in crude oil and natural gas production fields and is also produced in the oil refining process.

Australia has five sources of naturally occurring LPG- Bass Strait, Cooper Basin in Central Australia, North West Shelf, Kwinana in Western Australia and Surat Basin in Queensland.

Australia currently produces about 3,300 kilotonnes of LPG annually. Of these volumes, 80 percent is naturally occurring, extracted from oil and gas production and 20 percent is extracted from crude oil in the refining process.

Australia currently consumes about 1,907 kilotonnes of LPG each year with production projected to grow to 5,024 kilotonnes by 2020. We use around 47 percent of all production and export the remaining 53 percent (predominantly butane). The automotive industry uses nearly 65 percent of the total Australian consumption of LPG in the form of autogas.

Australia currently exports 40 percent of its natural gas production and imports approximately 40 to 50 percent of its crude oil needs. Crude Oil requirements are forecast to rise over 80 percent by 2020.

[Davehoos]

Most big companies are selling off their real estate for that big bottom line bounce. some service stations have signs that the distribute other products.

name brand service stations around here sit empty waiting for lease owners- cant be very good return if they have to be boarded up.


http://www.agl.com.au/about-agl/how-...cility-project

A truck loading facility to allow the dispatch of up to 1,000 tankers of LNG per year

http://www.agl.com.au/about-agl/how-...ct/the-project

was in the paper that export terminal has stopped. this AGL facility converts pipe line gas to liquid. next to the harbour port terminal.

[Road_Warrior]

A lot of the issues with service station sites (for the oil companies that is) is that they arent freehold owned, they are leased and the annual rents for some of them are in the hundreds of thousands or have rent pegged at a percentage of volume. Retail profits on petrol products is already wafer thin (if not non-existent) and so adding an annual lease onto that of say $150,000/pa multiplies the pain.

Yes, building a new company owned site is expensive in terms of upfront capital investment but once it is done it is done and you have a much better chance of controlling your costs if you own it and run it yourself. And then there are the tax benefits for claiming asset depreciation etc.

I think what BP are doing is going through a second rationalisation period. In the 1990's they did this and offloaded a lot of old-skool and dud service stations that weren't much chop for high volume, had high costs (i.e. needed lots of people to run them) and also spent up big on new sites. Following this they consolidated their market share and their remaining supply and retail network to better place them for the next 10 years or so.

I guess now that 10 years is up and they are once again looking to the future to see where trends are heading and if there are any dud assets they can offload or expensive leases and operations they can get out of. They won't quit retailing here but no doubt they will be thinking about the lessons of the past with oil shocks, the GFC and the effect tightening emissions regulations will have on cars and what effect in turn that will have on what they sell and how much.

[blackf6]

Yes there is a big restructuring going on. Many servo's are already independents with the major company branding staying on the buildings. And a lot of product (fuel) is already sourced from offshore.

[jpd80]

Originally Posted by Road_Warrior

That and the Kwinana refinery can provide a whole host of products and lubricants you simply can't bring in on one tanker.

Really?
Product tankers have multiple compartments and can transport more than one product at a time....
White products and black products can be transported this way...

Forget about Kwinana for a moment, WA is not the rest of Australia where refining costs are getting harder to justify,
those refineries are on the chopping block while the West will continue on much longer..

As an example,
Occupational health is now making it difficult for Alkylation plants to continue as Hydroflouric Acid risk
is just too hard to manage, it's just easy to import those high end products than make them here.
Maintenance costs have gone through the roof in the past five years - that's what's driving this,
it's just too dear to maintain older out of date technology when you can side step the lot and use
a larger refinery off shore..

Several years ago I had a long and interesting discussion with a former Shell engineer who basically
was not surprised with Shell's decision, it's being driven by factors other than local considerations.
This has been coming for a long time, BP cannot ignore what Shell has done to improve costs.

[Davehoos]

I have a mate that job was to sell oil products in new Zealand.

the short version was they purchased products often loaded into ships as job lots. Then his job was to get rid of the unwanted products.

the example was that diesel was purchased as a % of other fuel types and they payed large transport companies with bulk tanks to take the fuel so they could get unleaded.

I had neighbours that also did the same but they have retired and sold off the business before the GFC.

[blackf6]

Some of the other restructuring is laying off allot of managers and directors. Also the distribution is getting a shakeup with line hall going up for tender and scheduling getting sent offshore for some depots.

[Road_Warrior]

Originally Posted by jpd80

Really?
Product tankers have multiple compartments and can transport more than one product at a time....
White products and black products can be transported this way...

7 1/2 years in the petroleum industry in operations and retail I think I know full well what a tanker will and will not bring in. It is less about the tanker and more about the storage at the other end.

The majors have obviously decided there are too many refineries on the east coast and are culling them in the face of national and global overcapacity.

[bungarra]

Originally Posted by Road_Warrior

Hell will freeze over before the government allows the Kwinana refinery to close. If BP sells it, an independent will pick it up.

When BP were threatening to close Kwinana a few years ago, Gull and another independant were prepared to buy it. Maybe the same again?

[Syndrome]

Looks like this country is returning to the 1800s where we will be again living of the primary industries.

If you want a strong economy you need strong secondary (value adding) industries. It is what has helped Germany become strong again even after being decimated by two wars.

[GASWAGON]

BP in Melbourne is very predominant......They have the two big stations on either side of the new Eastlink now and also up the Hume hwy......And they are rebuilding a few servo's around too......And sometimes when independents go broke months later it turns into a new BP.

Thers really only four big players now that Mobil are finished......Shell, BP, Caltex and United. I try to use United if I can.

And ye servos don't make money from the fuel they make it from all the other stuff in the shop like food, drinks, mags, etc etc.

[Road_Warrior]

Originally Posted by bungarra

When BP were threatening to close Kwinana a few years ago, Gull and another independant were prepared to buy it. Maybe the same again?

I don't remember that...? I spent an unfortunate 3 1/2 years of the aforementioned 7 working for Gull and it never came up at during my time there. It may have been afterwards. It was some years ago. They (BP) have certainly gone quiet on the refinery these days and are carrying out building works there as a mate was working for the prime contractor doing the building.

Fred Rae certainly liked the idea of having his own refinery and had the land at the terminal to build a small one, but the costs of doing so were prohibitive for a relatively small company with limited product and brand reach.

It was simply easier to get product straight from the BP refinery via a redundant line that used to feed a Western Mining Corp site next door.

Gull can't/won't buy anything now because the Rae family sold the whole shooting match off to Ausfuel who in turn were sold off to Puma Energy and in time I'd suggest they'd rebrand all the Gull sites to their own brand. Peak got taken over by Gull late 2000's and is now in the same boat. I don't know of any other independents left with the sort of capital needed to buy the refinery.

[blackf6]

Puma Energy is starting to buy a few company's now. Direct hall, Fuel Central, Energy Trans.

[GASWAGON]

They're basically forced to use the offshore refineries and import the fuel because otherwise the pump prices are too high and the customers go filling at the cheaper servo that's is already importing.....

And if the government would get rid of the LPG pricing system it would let BP and the others compete for the lowest locally refined LPG and really bring the LPG prices down.

And I think gradually the independents will get pushed out and go broke......They just cannot compete with the big 3.

[csv8]

Import Parity Pricing should go...

[66XR8]

Originally Posted by teak81

Puma Energy is starting to buy a few company's now. Direct hall, Fuel Central, Energy Trans.

And caltex's bitumen business. They also have McDonald Murphy in mackay and are looking at another Townsville based company

[Jason[98.EL]]

Originally Posted by EF_6

BP in Melbourne is very predominant......They have the two big stations on either side of the new Eastlink now and also up the Hume hwy......And they are rebuilding a few servo's around too......And sometimes when independents go broke months later it turns into a new BP.

Thers really only four big players now that Mobil are finished......Shell, BP, Caltex and United. I try to use United if I can.

And ye servos don't make money from the fuel they make it from all the other stuff in the shop like food, drinks, mags, etc etc.

yep they just built a massive one on the Geelong ring road that opened a few weeks ago and there is another one being built on the other side of the road as well they both have maccas in there as well

[Sprint XR8]

Originally Posted by EF_6

BP in Melbourne is very predominant......They have the two big stations on either side of the new Eastlink now and also up the Hume hwy......And they are rebuilding a few servo's around too......And sometimes when independents go broke months later it turns into a new BP.

Thers really only four big players now that Mobil are finished......Shell, BP, Caltex and United. I try to use United if I can.

And ye servos don't make money from the fuel they make it from all the other stuff in the shop like food, drinks, mags, etc etc.

The majority of BP's Victorian sites including the new Eastlink, Hume Hwy and Geelong Ring Rd servos are privately owned by AAA Holdings. The few remaining BP owned sites will eventually be sold off.

[jpd80]

Originally Posted by Road_Warrior

7 1/2 years in the petroleum industry in operations and retail I think I know full well what a tanker will and will not bring in. It is less about the tanker and more about the storage at the other end.

The majors have obviously decided there are too many refineries on the east coast and are culling them in the face of national and global overcapacity.

yes.
Not telling you your business but this senior engineer had tears in his eyes when he told me
about Shells plans and how they expected BP to follow suit. Shell tried importing products
previously but stuffed up the logistics but then found a way to make it work, engineering and
operations were absolutely gutted as they though they had much longer to go.

Plans involve turning refineries into additional terminal storage with more regular deliveries,
seems refining elsewhere and transporting is seen as "simpler business footprint"
everyone in senior management want to cut local resources and and just import products.

It all has a very common sound to it..


Like yourself I've been in and around various refineries and bulk storage facilities for close on 35 years now...
To say that experience operations staff on the East coast are dumfounded would be an understatement,
senior management would rater risk shortages of supply than continue refining here..

[blackf6]

Originally Posted by 66XR8

And caltex's bitumen business. They also have McDonald Murphy in mackay and are looking at another Townsville based company

Mc Donald Murphy has already changed names twice in the last 16 months to Fuel Central and now Puma. Puma have almost finished construction of a new terminal in Mackay too. Puma also bought over 100 servo's across Australia in a 24hr period. The big matilda road houses along the Bruce Highway to name a few.

[GASWAGON]

Originally Posted by CoupeXB

The majority of BP's Victorian sites including the new Eastlink, Hume Hwy and Geelong Ring Rd servos are privately owned by AAA Holdings. The few remaining BP owned sites will eventually be sold off.

Gees o.k.....So they're just using the BP name then.....Do they pay BP rent or something for that?

[66XR8]

[QUOTE=jpd80;4983659]yes.
Not telling you your business but this senior engineer had tears in his eyes when he told me
about Shells plans and how they expected BP to follow suit. Shell tried importing products
previously but stuffed up the logistics but then found a way to make it work, engineering and
operations were absolutely gutted as they though they had much longer to go.

Plans involve turning refineries into additional terminal storage with more regular deliveries,
seems refining elsewhere and transporting is seen as "simpler business footprint"
everyone in senior management want to cut local resources and and just import products.

It all has a very common sound to it..

There is every chance Shell will go the same way and sell off a big chunk of there risk, I mean stuff. At the end of the day Australia is so expensive, it's cheaper to get the product from overseas, the overseas tankers have cheaper labour. A lot of Australia's product comes from Singapore and Japan. I totally agree with the smaller footprint even tho it sux