SINGAPORE- Asian fuel exporters are hungrily eyeing Australia as the country’s shutdown of almost all its refineries creates a bright demand spot amid otherwise coronavirus crimped markets.
China appears to be best placed to take advantage of the opportunity, industry sources and analysts told Reuters, potentially leapfrogging the current top suppliers Singapore and South Korea in the scramble for a piece of the action.
Australia, already the region’s largest fuel importer, will likely boost imports by a third next year to 630,000 barrels per day (bpd), according to energy consultancy FGE.
“We expect most of the fuel imports to come from Chinese refiners, due to Chinese officials’ continued increase in refined products export quotas and the 600,000 bpd (barrels per day) expansion to Chinese refinery capacity in 2021,” said Julie Torgersrud, an analyst at consultancy Rystad Energy.
“New, high-complexity refinery capacity starting up in China puts increased pressure on competing refiners in the Asia Pacific region, who are suffering from lower margins and usually have older, less efficient operations.”
China’s refinery capacity is forecast to increase by 1.5 million bpd over the next two years, according to Rystad, compared with a net reduction of 1.2 million bpd across the Asia Pacific over the same period.
“We have exported diesel and gasoline to Australia before but it wasn’t as economical as selling into Southeast Asia,” a trader with a Chinese refiner told Reuters. “If demand rises with refinery closures and push up prices, then we’ll export more.”
There are only three oil refineries still operating in Australia after four shutdowns over the past decade, spurred by declining financial viability amid the growth of large-scale, exportoriented refineries throughout Asia and the Middle East.
Exxon Mobil Corp’s decision to close its 90,000 bpd plant in Victoria state later this year will leave just two, owned by Ampol Ltd and Viva Energy, which will meet less than 25 percent of the country’s almost 1 million bpd annual fuel consumption.
Ampol’s Queensland refinery and Viva’s Victoria plant have a combined production of about 87,000 bpd of diesel, a meagre 17 percent of Australia’s consumer sales of 509,000 bpd last year, a Reuters analysis of government and companies data showed.
Potentially adding to the squeeze, Ampol is reviewing the future of its refinery with a decision expected by June.
Australia is heavily reliant on diesel to fuel its robust mining and trucking sectors, and diesel accounts for over half the country’s refined product imports.
To boost energy security, the government is planning to increase the minimum level of national diesel stocks, which averaged 1.4 million tons (10.2 million barrels) in 2020, by 40 percent by 2024.