The big, beefy blokes riding bicycles between work stations are not the only surprise in store for visitors to ExxonMobil's Altona fuel refinery in Melbourne's west. Despite being one of the oldest and smallest refineries in a domestic industry that is shrinking because it's too old and too small to compete with rivals abroad, Altona is bucking the trend of refinery closures, and strapping itself in for the long haul. After a decade when half of Australia's eight fuel refineries have closed, and another sold because it was losing money, Exxon insists that Altona can be an exception to the rule and continue returning profits. ''We fundamentally think differently about this business than our competitors do, '' said Andrew Warrell, Exxon's refining manager for Australia and New Zealand. ''We think we have a better business model and it's certainly more resilient to what we can foresee on the horizon, '' he said, adding that Altona was ''making money'' at the moment. Warrell believes the formula that allows Altona to survive is not well understood in the broader market. Some market forces have helped too, despite the oft-touted pain caused by the strength of the local currency and high labour costs. All refineries run on different types of oil, and the type that Altona needs - certain light, sweet crudes - have become cheaper over the past decade on the back of extra supply created by the shale boom in the US.
Large smoke plumes at Altona Refinery SMH com au
''The cost of our feedstocks has gone down enormously relative to the alternatives. That is what fundamentally changed that provided a much cheaper input cost for this refinery, '' Warrell said. The closure of four rival refineries on Australia's east coast is also easing the competitive environment. ''I'm not going to celebrate the demise of our competitors but … where it is happening we will take full advantage, '' he said. Only BP's Kwinana refinery (with WA's resources industry on its doorstep) and Caltex's Lytton refinery in Queensland (which produces the high-yield fuels that are increasingly in demand) survive in their original form, with Swiss company Vitol also set to try to save Shell's loss-making Geelong refinery.
Those refineries are more than 85 per cent larger than Altona. The depressed mood in the local manufacturing industry makes it hard for Exxon to convince stakeholders that its pledges about Altona's survival can be trusted. But that's where new investment helps. Altona is a hive of investment activity, with new cooling towers, a new benzene reduction plant, an IT upgrade and a port upgrade at nearby Williamstown chewing through $855 million over five years. A new multistorey administration block is also being built on site.
Wrecking party trash 500 a night Altona beachside rental
''It's not a lay-down misere … but from what we see, we think we've got a good, strong business model that can be successful despite the tough conditions. ''Credit Suisse analyst Mark Samter cautions that it's dangerous to view spending on a refinery as proof of its longevity. ''I take with a pinch of salt the comment that they are investing capital in it. Refineries are highly capital-consumptive assets. If you keep it open you have to spend a lot of money on it, '' he said.
But Samter agrees that Altona's structure has given it an edge over some local rivals. Rivals such as Shell and BP have not had offshore oilfields to support their east-coast refineries, although Shell has purchased Bass Strait crude from Exxon and BHP for Geelong. ''That is what extends its life compared to the other Australian refineries. I think Exxon would be talking a very different story once the oil supply runs out of Bass Strait. ''But for now, unions are confident that Altona, with its 855 workers, will not be joining the list of failed Australian refineries in the near future.
''There was a period of time when the Altona refinery could have been at risk, but I think the local workforce and local management have been very strategic and very smart … and they've been able to get the investment they need, '' said Tim Kennedy from the National Union of Workers. ''We see it as a fairly shining example of a company interacting well with their workforce. '' Geoff Mitchelmore is a mild-mannered former industrial chemist, not given to profanity, but even he admits that 66 years ago, the Kororoit Creek at Altona North was a shithole. It was an industrial wasteland of shopping trolleys, car wrecks, builders' rubble and weeds, a playground for motorcycle riders, drug dealers and snakes. Kororoit Creek in Altona North was once described as an industrial wasteland, now the area is home to 695 species of birds.
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