Caltex Australia has refused to guarantee the long-term future of 660 workers at its Brisbane oil refinery after committing to shutting its Sydney plant.
A combination of cheap labour costs and newer, larger and more efficient refineries in Asia have left Caltex’s refineries bleeding money.
Caltex will close its Kurnell refinery in Sydney in the second half of 2014 and convert it into a fuel import terminal, following a year-long review.
More than 330 employees’ jobs will go, along with an unknown number of its 300 contractors.
Caltex Australia chief executive Julian Segal said there were no plans for short-term job cuts at Brisbane’s Lytton refinery.
But nor did he guarantee it for the long term, saying tens of millions of dollars would be spent improving its competitiveness.
“That goes for any part of the Caltex business, any part of any well-managed business,” he told reporters.
Some analysts believe Caltex has already decided to close both refineries, with the value of those assets written down earlier this year to $340 million, from $1.8 billion.
One analyst said Caltex seemed to be staggering the closures to see how the supply chain worked with one refinery.
“If it is going very well and making more money they will probably have a close look at Lytton and see wether it’s still worthwhile to have that running,” the analyst told AAP.
When Shell closes a NSW refinery next year, there will be six left in Australia – all with uncertain futures.
The massive writedown and operating losses of more than $200 million led Caltex to post a full year net loss of $852 million in February.
It insists the decision to close the Kurnell refinery was necessary to secure Caltex’s future.
“The refinery has been generating major financial losses in recent years,” Mr Segal said.
The high $680 million cost of shutting the refinery and converting it has raised eyebrows among analysts, who warned it might rise more.
Shareholders will wear reduced dividend pay-outs until 2015 before the cost benefits start to flow through.
Chief financial officer Simon Hepworth flagged issuing hybrid securities to deal with it, with Caltex saying it intended to maintain its BBB+ rating from Standard and Poor’s.
The costs include redundancy payouts, equipment removal and cleaning up the environment.
However Caltex sees the release of working capital and cashflow benefits as worth it.
Mr Segal denied there was pressure to restructure from its 50 per cent shareholder, global energy giant Chevron.
Spokesmen for the Australian Manufacturing Workers Union and Australian Workers Union accused Caltex of acting duplicitously and not meeting with them first before announcing job losses.
Mr Segal said he was committed to doing all he could to help the workers and their families “cope with this transition”.
The announcement has raised concerns about Australia’s energy security.
Resources Minister Martin Ferguson said that security would not be jeopardised, although some analysts said that view might change when more refineries close.
Caltex’s shares gained 20 cents to $14.26 on Thursday.
