BP is to cease refining operations at its Kwinana Refinery near Fremantle in Western Australia and convert it into an import terminal.
The oil giant says that the 65-year-old refinery is no longer economically viable, due to regional oversupply and sustained low refining margins. The Australian market has “structurally changed” as a result of the continued increase in large-scale, export-orientated refineries in Asia and the Middle East. BP believes that converting the site into a terminal is the best option.
Refining operations will decrease over the next six months, before construction work begins on the terminal. It is expected to be complete in 2022.
Frédéric Baudry, BP Australia head of country, acknowledged the important role that the refinery had played in the development of Western Australian and its key industries, and says that the decision to end refining had been ‘difficult’, but was not as a result of local policy settings.
‘It comes in response to the long-term structural changes to the regional fuels market. Converting to an import terminal will not impact the safe and reliable supply of quality fuel products to Western Australia; however, it will require fewer people to run. We deeply regret the job losses that will result and will do everything we can to support our people through the transition,’ he says, adding that BP is committed to Australia and is making significant investments in natural gas production.
The refinery currently employs around 650 people, including 400 permanent staff and 250 contractors. The import terminal will employ around 60 people.
BP will also investigate other options for the site in future, including a potential clean energy hub which could produce and store lower carbon fuels, such as aviation and marine fuels, and waste-to-energy solutions such as renewable diesel. This could help to support Western Australia’s plans for net zero carbon emissions by 2050.
In September, the Australian government announced a A$211 million (€129 million) package to ensure long-term fuel security, including building new storage capacity and providing financial support to local refineries. Kwinana is not the only refinery in trouble. Viva Energy said in August that it plans to start designing an LNG terminal at its Geelong refinery site before the end of 2020, following ‘unsustainable’ refining losses, while Ampol said in August that it is reviewing operations at its Lytton Refinery in Queensland.