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Shell's Latest Move Highlights Challenges Facing Australian Refiners

http://www.fool.com/investing/general/2013/04/07/shells-latest-move-highlights-challenges-facing-au.aspx

Arjun Sreekumar
April 7, 2013

Royal Dutch Shell (NYSE: RDS-A) recently said that it's looking to offload its last remaining refinery in Australia, as the oil and gas company reconsiders its operations in the country. Shell is currently searching for a buyer for its 120,000-barrel a day Geelong refinery in southeastern Australia, as it refocuses its investment toward large-scale facilities in the Asia-Pacific region, such as its Pulau Bukom refinery in Singapore.  

The Geelong refinery, which has been operating for more than five decades, produces a diverse array of products, including ultralow-sulfur diesel. According to statistics from the Oil & Gas Journal, Geelong has a capacity of 113,500 barrels per calendar day, or b/cd, for hydrotreating, 40,000 b/cd for catalytic cracking, 20,000 b/cd for cyclic catalytic reforming, and 11,000 b/cd for semiregenerative catalytic reforming.

Andrew Smith, vice president at Shell Refining Australia, said he hopes to finish up the sale process by the end of 2014. If the company fails to receive an attractive offer, it has the option of converting the plant into an import terminal, a process currently under way at Shell's former Clyde refinery in Sydney.

In a separate decision, Caltex Australia, which is partially owned by Chevron (NYSE: CVX), recently said it will also be converting its Kurnell refinery -- also in Sydney -- to an import terminal.  

Australia to become major oil importer
Since Shell and Caltex Australia announced the closure of two ageing refineries near Sydney last year, Australia's refining capacity has been reduced by almost a third. Growing competition from Asia and weak margins are the two major factors behind the country's spate of recent refinery closures. In addition, Australia-based refineries are struggling with high global crude prices and a strong Australian dollar, which has led to higher