BP drive for more petrol stations

BP is in talks to buy more petrol stations despite oil refinery closure.

BP is in confidential discussions to buy more petrol stations despite its decision to reduce its exposure to the oil refinery sector by closing its ageing Bulwer ­Island refinery at the mouth of Brisbane River in mid-2015.

The commercially confidential discussions were revealed by BP Australasia president Andy Holmes at a Melbourne media conference for the Bulwer Island announcement, with the closure to cost the jobs of at least 355 BP employees while raising question marks over the future of 300 contractor jobs.

Mr Holmes said that despite the death knell for Bulwer Island, BP remained committed to capturing an increased share of the Australian fuels markets. “Our view is to actually be buying more retail assets rather than selling,” he said. BP was “looking to buy more retail assets but it is commercially confidential”.

It has been a feature of the petroleum products market that supermarket operators Woolworths and Coles have become the biggest retailers of petrol through co-branded sites with Caltex and Shell respectively. Shopper docket inducements on petrol pump prices has fuelled the rise of the supermarket operators, with BP in a battle to hold market share through its 1300 outlets.

Competition also has emerged from global commodities trader Trafigura, which recently acquired petrol stations, and Vitol, the international oil trader that recently agreed to ­acquire Shell’s Geelong refinery and its 870 Coles co-branded petrol stations.

Any acquisition by BP of addi­tional retail assets is likely to come from the independent sector of the business which, according to one estimate, accounts for about 15 per cent of retail petrol sales.

The closure of the 102,000 barrel-a-day Bulwer Island refinery will leave BP with the much larger Kwinana refinery in Western Australia. Mr Holmes would not guarantee the long-term future of Kwinana. But he added that it had an advantage with the local crude oil feedstock it can process, and its ability to produce high-octane fuels.

The pending closure of Bulwer Island means Australia’s fleet of oil refineries has been halved from eight 10 years ago to four: Lytton (Caltex) in Brisbane, Altona (Mobil) in Melbourne, Kwinana (BP) in Perth and Geelong (Shell selling to Vitol) in Victoria.

“The market reality is that global refining capacity is shifting to service the energy growth areas of the globe, and is doing so with very large export-based refineries which, fortunately for Australia, are based in our region,” Mr Holmes said.

He said Australia was well served by diverse supply chains and was able to capitalise on the overhang of refined products in the Asia-Pacific region.

“Australia is connected to the biggest growing fuels market in the world, which is Asia. It is the route to secure fuel supply.’’

Mr Holmes said the biggest factor in the demise of Bulwer Island had been the growth of “very large refineries in Asia”.

“That has presented the Bulwer operation with a huge challenge which it was not able to meet. Even if there had been huge investment in Bulwer, still it would struggle,’’ Mr Holmes said, adding that wages and conditions at the refinery were not a factor in the closure decision.

Mr Holmes predicted the industry would channel investments into product imports and distribution infrastructure, and that there would be sharing — rather than the duplication — of supporting infrastructure.

He said that competition policy settings had to ensure the industry could meet the challenge of building additional infrastructure on a cost effective basis.

Bulwer Island is unlikely to close all together, with Mr Holmes saying there was a “very strong case to convert it into a full import terminal”.

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