Fuel supplier and distributor Caltex Australia says an ongoing review of the future of its loss-making refineries is focusing on the Kurnell refinery in Sydney.

Caltex says its refineries are relatively small and, in their current configuration, are disadvantaged compared to bigger refineries in Asia.

Caltex announced a review of its refinery operations in August 2011, after the refineries’ financial performance was hurt by the high value of the Australian dollar, higher costs and lower margins.

Caltex chairman Elizabeth Bryan told shareholders at the company’s annual general meeting in Sydney on Thursday that no final decisions had been made yet in relation to the review.

But, Ms Bryan said, refining operations had continued to lose money during the first three months of the 2012 calendar year, with the Kurnell refinery in Sydney representing the majority of the losses in 2011 and so far in 2012.

“This is expected to continue into the future,” Ms Bryan said.

“Therefore, the review is focused on the Kurnell operation.”

Australian Workers Union (AWU) national secretary Paul Howes says the future of the refinery was “on a knife’s edge”.

He urged Caltex to keep the refinery open, saying 800 jobs were at risk.

Consumers would also be left exposed to price spikes in imported fuel.

“Retaining a local manufacturing presence would give Caltex greater flexibility, and would be an important safeguard for motorists should there be a spike in the cost of imported fuel,” he said in a statement.

“The Kurnell refinery plays an important role in Australia’s energy security. We cannot afford to reduce our domestic refining capacity.”

Ms Bryan said the configuration of the Lytton refinery in Brisbane was better suited to the product mix demanded by Caltex’s customers.

“Consequently, management is exploring a pathway to create a viable operation at Lytton,” she said.

Caltex chief executive Julian Segal said refining and supply operations had suffered a pre-tax loss of $60 million in the first quarter of 2012.

Earnings from refining operations were expected to improve in the second quarter, but the ongoing strength of the Australian dollar would continue to pressure Caltex refinery margins in the medium to long term.

“This reinforces the importance of making the right decision on the refinery review to ensure that Caltex has the most competitive product supply chain to support our growing core business,” Mr Segal told shareholders.

“In addition to our own refineries, product today is increasingly sourced from a mix of domestic and international competitors’ refineries.

“Our refineries today produce approximately 50 per cent of the transport fuels supplied by Caltex to the market.”

Caltex shares closed one cent lower at $13.39.