SYDNEY: Oil giant Royal Dutch Shell unveiled plans Tuesday to convert one of its two Australian refineries into an import hub for Asian fuel, blaming strong regional competition for hitting business.
Shell Australia, the firm's local subsidiary, said Sydney's 75,000-barrel-per-day Clyde refinery was no longer competitive, as it was up against huge operations in places such as India, Singapore, South Korea, Japan.
"There has been a number of new, very large refineries built in the region in the past few years, and indeed we see more being built in the future," said Andrew Smith, vice-president of downstream operations.
"That is creating an overcapacity in refining, and recent predictions for the outlook for refinery margins remain weak."
Smith and national Resources Minister Martin Ferguson both stressed that the move was unrelated to the ruling Labour party's plans to introduce a carbon tax, which is widely opposed by the conservative opposition and resources firms.
The 100-year-old refinery in western Sydney, which supplies about 40 percent of the city's fuel needs, was due for a maintenance overhaul in 2013 and would require significant investment, Smith said.
But instead, Shell said saw more profit in transforming it into an import terminal for Asian fuel, he added.
"Those refineries in the region can supply Australian specification products in significant quantities these days, which wasn't necessarily the case in the past," Smith said.
The company would consult the refinery's 300 staff before making a final decision, with jobs to shrink to between 30 and 50 if the import plan goes ahead, he added.
Shell's other refinery near Melbourne has a capacity of up to 120,000 barrels per day.
Smith said the move was "consistent with Shell's strategy to focus its refining portfolio on larger integrated assets" as it targeted the lucrative liquefied natural gas (LNG) sector, where Australia is seen as a major player.
"Over the next 10 years Shell anticipates being one of Australia's largest investors, with Australia underpinning Shell's next tranche of global LNG growth," he said.
Shell is a major partner in the Timor Sea's massive Greater Sunrise gas project, and sealed a joint takeover with PetroChina of Australian coal-seam gas firm Arrow Energy last July.
Prime Minister Julia Gillard has vowed to put a price on carbon in a bid to reduce Australia's heavy reliance on coal-fired power and associated pollution.