Viva Energy Group will shut down a unit of its Geelong Refinery in Victoria as it seeks to reduce surplus production to cope with a collapse in fuel demand because of the coronavirus pandemic.
Viva and other Australian refiners have been hit hard by plunging demand for transport fuels such as gasoline and jet fuel as measures to contain the viral outbreak have disrupted travel, businesses and industries.
The company in March slashed its capital expenditure forecast for the year and deferred a share buyback.
Viva said closure of the refinery’s Residual Catalytic Cracking Unit and other associated processing units would not have a material financial impact or disrupt fuel supply.
The company’s 120,000-barrels-per-day Geelong refinery is second largest among Australia’s four refineries and supplies about 10 per cent of the country’s oil product needs.
“Taking into account the cost efficiencies that would flow from not operating the units, the incremental financial impact of this action is expected to be immaterial in the current refining margin environment,” the company said on Monday.
Viva said the refinery’s main crude distillation unit would continue to operate and it expected refining intake to be reduced to about 2.5 million barrels a month.
Viva’s shares were $1.36 before the start of trade on Monday. They are down almost 30 per cent since the start of the year amid a wider market downturn.