Feb 16, 2012:

Caltex Australia Ltd., the nation’s biggest oil refiner, may close its plants after writing down their value by A$1.5 billion ($1.6 billion) because of competition from Asian plants and a strong Australian dollar. The company aims to complete a year-long review of its refineries in about six months, with options ranging from investment to closure, Sydney-based Caltex said today in a statement. The writedown reduces the book value of its refining assets to A$340 million, the company said.

The company, half-owned by San Ramon, California-based Chevron Corp., operates the Kurnell refinery in Sydney and the Lytton refinery in Brisbane. Royal Dutch Shell Plc, Europe’s largest oil company, said last year it would halt refining operations at its Clyde plant in Sydney before mid-2013, saying it was no longer competitive against Asian “mega-refineries.” Caltex’s two refineries are “disadvantaged compared to the modern, larger scale and more efficient refineries in the Asia region,” Caltex said. “This disadvantage has been exacerbated by the impact of the ongoing strength of the Australian dollar,” which has weakened margins, it said.

Caltex shares fell 2.2 percent to A$12.27 at 10:58 a.m. Sydney time, compared with a 1.2 percent drop for the benchmark index. The company, which started its refinery review in August, said its 2011 profit outlook is unchanged, excluding the effect of the impairment charge. Caltex said it doesn’t expect any effect on “safe and reliable operations, credit metrics, debt covenants and commitment to reliable supply.” The company will book a A$1.5 billion non-cash adjustment in its 2011 accounts, it said.

By Bloomberg