In an attempt to redesign the asset portfolio Royal Dutch Shell plc (RDS.A) disclosed plans to close its refinery in Australia, Clyde Refinery and Gore Bay Terminal, and remodel it as a fuel import terminal, supplying to the New South Wales market and the growing western suburbs of Sydney. The proposal is pending approval by the respective Shell Australia boards.
Shell management elucidated that the 75,000 barrels per day Clyde Refinery in Sydney could not catch up with the sharp competition arising from the new mega-refineries in the region. As such, Clyde needs a bigger investment, including a major maintenance turnaround in mid 2013, to keep running.
The proposed terminal’s capacity would be of the same level as Clyde’s current throughput, which accounts for about 40% of the market in the state of New South Wales.
However, this transformation will jeopardize the jobs of employees at Clyde and Gore Bay. Shell has already informed them of the proposal, but would consult the workers’ representatives before the final decision is taken.
Shell remains focused on developing the Australian downstream business through various ventures and initiatives. These involve construction of new diesel storage in Mackay, Newcastle, Kalgoorlie and King Bay, $47 million investment in a water processing plant at the Geelong Refinery and $27 million investment in bitumen facilities at the Geelong Refinery and in Brisbane. The company also aims to build a new wharf on the Brisbane River and spend about $80 million for service stations.
The Hague, Netherlands-based Shell is a global energy company engaged in oil and gas exploration, production, refining and marketing with operations and assets across the globe. We are maintaining a long-term Neutral rating on the stock.
Shell, which faces stiff competition from peers such as BP plc (BP) and Exxon Mobil Corp. (XOM), currently retains a Zacks #3 Rank (short-term Hold recommendation).
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