Geelong oil refinery could shut for good as Viva weathers COVID pain

Major fuel refiner and service station operator Viva Energy has said it may have to close its Geelong oil refinery for good as significantly reduced demand for fuel continues to weigh on the business.

In a market update on Monday morning Viva, which operates a national network of Shell-branded petrol stations, said it was assessing the possibility of moving to a "full shutdown" of the facility. The plant employs approximately 700 workers.

Viva has said it is considering permanently closing its Geelong refinery.Credit:Nic Walker

Viva has been significantly impacted by COVID-19 and its related restrictions on both international and local travel, which has wiped out demand for fuel. As a result, the plant sunk to a $50 million loss last month and is currently operating at reduced capacity whilst undergoing maintenance works.

Full production could resume at the plant by mid-November if the Victorian government's roadmap out of stage four restrictions is followed, the company said, however chief executive Scott Wyatt said the extended restrictions could still affect the company's plans.

"We have shown strong commitment to manufacturing in Victoria and have extended this by continuing to operate our refinery throughout these challenging times while undertaking the major maintenance of our key processing units," he said.

"Unfortunately, the impacts of COVID-19 and the restrictions on mobility and the economy are putting extreme pressures on the refining business that we have not experienced before and are not sustainable over the longer term."

"We are closely monitoring the evolving situation and will continue to keep our employees, investors and stakeholders updated."

If the Geelong plant is closed, Australia will be left with just three oil refineries. Viva's was the second-largest in the country, processing up to 120,000 barrels of oil a day and supplying around 10 per cent of the nation's liquid fuel needs.

All four refineries across the country have been significantly damaged by the COVID-19 pandemic, with operators expecting volatility and weak demand to persist for years as international travel remains muted.

The sector is currently working with the federal government to devise a strategy to ensure the "long-term viability" of the sector.

Viva will update investors on its plans for the refinery in October.

Outside of its refining business, Viva said its service station segment continued to be resilient and it expected volumes in Victoria would recover as restrictions are eased.

More to come

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