Australia’s Viva Energy has approved a two-month maintenance turnaround of key units at its Geelong refinery, due to begin late in the third quarter of this year, estimating the work could cost up to $140 million.
The oil refiner said it would take in about 1 million-1.5 million barrels less crude due to the turnaround, which it does once every four years, and added that the maintenance work would reduce its gross refining margin, without providing a figure.
Maintenance work on the residual catalytic cracking unit (RCCU) and other associated processing units at the plant in the state of Victoria is expected to cost between $110 million and $140 million, Viva said on Monday.
Viva’s 120,000-barrels-per-day Geelong refinery is the second largest among Australia’s four refineries and supplies about 10 per cent of the country’s needs.
The company plans to import refined products to replace lost production during the turnaround, Viva Chief Executive Scott Wyatt told analysts in an earnings call.
Viva on Monday reported a 41 per cent fall to $135.8 million in full-year underlying profit on a replacement cost basis, which strips out the impact of crude oil inventory and foreign exchange moves.
The annual numbers came in at the bottom-end of the petroleum refiner’s forecast provided in December, as refining margins late in the year were squeezed by high premiums for light sweet crude and disappointing demand for marine diesel.
Viva had been counting on strong demand for marine diesel to be blended with fuel oil during the transition for ships to meet new sulphur emissions limits under IMO 2020.
“That hasn’t really lifted diesel cracks as much as we would expect but it has lifted the demand for light sweet crudes, which are obviously part of the diet for our refinery and other refineries in the region as well,” Wyatt said.
“That’s what’s really weighed on refining margins more recently, through the back-end of last year and early this year.”
Viva’s shares were up three cents, or 1.09 per cent, to $2.78 at 1355 AEDT.