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Melbourne Herald Sun, Australia: Shell going well

Mandi Zonneveldt
May 12, 2007 12:00am

SHELL earned more than $1.7bn from Australian operations last year, but the company’s chairman has failed to guarantee the future of its refineries here.

Shell Australia chairman Russell Caplan said yesterday the oil giant was competing with large refineries in Asia and could consider importing its products rather than producing petrol, jet fuel and diesel in Australia.

“Our refineries in this country are very small by world scale,” he said. “The total refining capacity is equal to the size of just one of these Asian refineries.

“When it comes time for a major investment, hundreds of millions of dollars, then there’s a decision to be made – do you invest it in an old, small, sub-scale local refinery or do you invest it in a big modern refinery in India or Singapore or somewhere and import?”

Shell owns the Geelong refinery, which employs more than 500 people and produces about half of Victoria’s fuel.

The company has already ceased manufacturing base oil at Geelong because it could not compete globally.

Shell also owns the Clyde refinery near Sydney.

Mr Caplan declined to comment on when the the fate of Shell’s Australian refineries would be decided, but said it would not be within the next 12 months.

Shell earned $398 million from its Australian refining and marketing operations on a current cost of supply basis in 2006, up 33 per cent on 2005.

Current cost of supply strips out the impact of oil price movements and is seen as a better measure of the underlying business.

Shell is no longer a fuel retailer, having formed an alliance with supermarket giant Coles.

Most of Shell’s 2006 earnings came from its oil and gas assets, and the company is increasingly shifting its focus in Australia upstream.

Shell earned $1.3 billion from its upstream operations last year – a 38 per cent increase on 2005 – with strong sales of liquefied natural gas from the North West Shelf lifting the bottom line.

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