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Shell to Stop Processing at Australian Refinery by Mid-2013

By Ben Sharples and James Paton – Jul 27, 2011 7:19 AM GMT+0100

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, will halt refining operations at its Clyde plant in Sydney before mid-2013 and convert the facility into a fuel-import terminal.

The plant, which processes about 79,000 barrels a day of crude oil and employs 310 people, is no longer regionally competitive against Asian “mega-refineries,” the Hague-based company said in an e-mailed statement today. The plan was initially announced in April.

Shell said in March it intends to reduce global refining and marketing costs by $1 billion by the end of next year as it seeks to accelerate production growth through 2014. The company, which also operates a second refinery at Geelong in Victoria state, acquired Clyde in 1928 and the plant supplies about 40 percent of Sydney’s petroleum needs.

“Shell must evolve as it strives to remain competitive in a rapidly changing market,” Andrew Smith, vice president of the company’s Australian downstream unit, said on a conference call. “Australia is a growth center for Shell’s global business, particularly in liquefied natural gas, and the company is set to become one of the largest investors” in the country.

Shell said in May it expects to invest about $30 billion in Australian oil and natural gas developments during the next five years. The company that month approved the Prelude floating LNG venture off the coast of northwest Australia.

Carbon Tax

The plan to end oil refining wasn’t prompted by Australia’s proposed tax on carbon emissions, Shell said. Australia expects to make about 500 polluters pay A$23 a ton for their emissions from next year, before switching to a cap-and-trade system in 2015, Prime Minister Julia Gillard said this month.

There are seven oil refineries in Australia, with others operated by BP Plc (BP/), Caltex Australia Ltd. (CTX) and Exxon Mobil Corp. (XOM)

“Asian refining capacity is increasing, and it will have an impact on the Australian refining industry, but I’m not going to crystal ball gaze on margins,” Smith said. The conversion of Clyde into an import facility won’t impact fuel prices, he said.

Profits from turning crude into fuels such as gasoline and diesel are unlikely to increase as new capacity outweighs demand, Sanford C. Bernstein & Co. said in a June report.

OMV AG (OMV), central Europe’s largest oil company, said in May it started to close its 70,000 barrel-a-day refinery in Romania and turn it into a crude and fuel terminal.

LyondellBasell Industries NV (LYB) also said that month it was seeking a buyer for its 105,000 barrel-a-day Berre plant in southern France.

To contact the reporters on this story: Ben Sharples in Melbourne at [email protected]; James Paton in Sydney at [email protected]

To contact the editors responsible for this story: Amit Prakash at [email protected]; Alexander Kwiatkowski at [email protected]

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