NZ and Australia are becoming- increasingly dependent on foreign petroleum amid a major influx of cheaper refined oil products from China.
It comes as China’s crude oil refinery capacity is rapidly expanding while Australia is about to see its last four refineries cut down by two, given the looming closures of an Exxon Mobil and a BP refinery.
A recent report suggests China is poised to dominate crude exports in the Asia-Pacific region, particularly to “vulnerable” Australia – leaving Aussie government leaders concerned over self-sufficiency and if the country can weather the storm of Beijing’s “coercive trade warfare”.
“Chinese exports of refined oil products to Australia rose from a few thousand tonnes before 2011 to nearly 300,000 tonnes at the end of last year, according to figures from China customs,” the report begins by noting.
Following the announced impend- ing closures of BP’s Kwinana and ExxonMobil’s Altona plants, a third – Ampol’s Lytton plant – is now also said to be mulling a shutdown given its inability to compete with Asian refineries.
The fourth, Viva Energy’s Geelong refinery, has since last year been kept afloat by a federal government rescue package amid spiraling loss- es estimated at over A$100m.
“New, high-complexity refinery capacity starting up in China puts increased pressure on competing refiners in the APAC region, which are suffering from lower margins and usually have older, less efficient operations.”
NZ Refining (NZ: NZR), which operates this country’s only refinery is in the same category with an ageing, relatively inefficient plant that requires continual maintenance and has high operating costs.
NZR’s share price has fallen by 90% in the past 5 years, and China’s competitive advantage means it’s hard to see how this can be reversed.