Feb 17, 2012:

CALTEX Australia has revealed it could shut its two refining plants within six months as it yields to the growth of Asian "mega refineries".  Australia's biggest oil producer yesterday said the high Aussie dollar and competition from major refineries overseas had forced a $1.5 billion writedown of the domestic refineries. Caltex chief Julian Segal said he would announce the fate of the 800 workers at its refineries in Sydney and Brisbane within six months.

"We are reviewing the role of the refineries in the supply chain," Mr Segal said. "We will thoroughly evaluate all options - including investing in it, or closing (it) if we can import at a competitive price and keep the reliability of supply. "We have to consider the 're-supply' alternatives, the technical complexities ... there are millions of individual and commercial consequences. These are no simple matters, stakeholders need to be considered. It is essential to understand each option." Shares in Caltex Australia closed down 1.5 per cent yesterday at $12.35 a share. The writedown cuts the value of the refineries to just $340 million. Mr Segal said it was difficult for the Australian refineries - which each produce 100,000 barrels a day - to compete with Asian refineries that could produce 1.2 million barrels a day.

The Caltex chief would not say whether he believed the government should do more to keep refining operations in Australia. "From an Australian perspective it is a fair question but you should talk to the government of the day. " The company said that if the impact of the impairment was stripped out, its 2011 profit outlook was unchanged.

UBS Investment Bank analyst Gordon Ramsey said the high cost of decommissioning a refinery should also be taken into consideration and it wasn't simply a case of "turning out the lights". "There is the closure, the cleaning up of the site, redundancies - all those things have to be taken into account," Mr Ramsey said.