Ampol acting chief executive Matt Halliday said last month the company expected to benefit from the wave of “buy Australian” sentiment that has been fuelled by the pandemic, and noted that the new brand name had scored well with the public. All other major petrol retailing brands are multinational or foreign owned.
The upheaval in the service station landscape is happening as demand for transport fuels has been hammered by the travel restrictions imposed by federal and state governments. Refiners have put the drop in jetfuel demand at 80 per cent or more, while petrol consumption fell by up to 50 per cent during the tightest restrictions in March-April, and diesel demand dropped by up to 30 per cent.
Goldman Sachs energy analyst Baden Moore is remaining cautious on the outlook for the recovery in fuel demand and is assuming an average 30 per cent drop in transport fuel volumes for Viva and Ampol this June quarter compared to the same period last year. It is not expecting petrol and diesel sales volumes to recover to “normalised” levels until the first half of 2021. The recovery for aviation fuel will be slower, taking until next year to see much of a revival, impacting Viva more than Ampol because Viva is more exposed to the aviation sector, Mr Moore said in a report.
Refiner margins which were already soft last year, further weakened, causing some refineries to run at a loss and driving a rethink of maintenance plans, which were also hit by physical distancing requirements demanded by COVID-19. Goldman Sachs estimates that Viva’s Geelong refinery ran a $45 million cash loss during the first four months of the year, while Ampol’s equivalent figure for its Lytton refinery in Brisbane was a negative $40 million cash burn, although is forecasting refining margins will continue to improve into the second half.
Ampol has shuttered its Lytton refinery in Brisbane for extended maintenance, while Viva Energy has shut two units at its Geelong refinery and is reassessing maintenance work due to be carried out at the plant later this year. Production has also been pared back and the production mix adjusted at the country’s two other refineries, BP’s Kwinana plant in Western Australia and ExxonMobil’s Altona site.
IHS Markit research director Premasish Das said Australian refineries had been “vulnerable” for some time and pointed to challenges for the plants over the next few years as refiner margins are expected to remain under pressure. But he said the pricing in the Australian market was relatively supportive for refiners, while the view of government on whether it wants to keep the industry running would also come into play.
“Refiners in Australia are finding the market hard to play in, hard to be part of,” Mr Moulis added.
