Viva Energy to upgrade Geelong Refinery to produce ULSG
Viva Energy Group Limited announced that its board has approved the funding to upgrade the processing capability at Geelong Refinery located in Victoria, Australia, to produce ultra-low sulphur gasoline (ULSG). This investment will improve the quality of petrol produced at the refinery and help reduce vehicle emissions. It will also improve the refinery’s crude processing flexibility.
The total cost of the project is expected to be approximately AUD300 million (USD222 million). Viva Energy will receive AUD125 million (USD92 million) under the Federal Government’s Refinery Upgrades Program. The project will be completed over the next three years, with approximately AUD50-70 million (USD37-51 million) expected to be spent during 2022. During peak construction, the project will employ up to 300 people, adding to more than 700 people employed at the refinery on an ongoing basis.
“Viva Energy is proud of our role in supporting energy security. We have recently committed to continue refining in Australia through to mid-2028, and construct an additional 90ML of diesel storage to improve Victoria’s fuel supply security,” said Viva Energy CEO, Scott Wyatt.
The Geelong refinery was established by Shell Australia in 1954. Viva Energy was created in 2014 when parent company Vitol acquired Shell’s refining and distribution operations in Australia. Vitol, a Dutch energy and commodity trading company that was founded in Rotterdam, The Netherlands, in 1966 by Henk Viëtor and Jacques Detiger. retained 45% of Viva Energy when it was floated on the Australian Securities Exchange in 2018.
Geelong is one of two oil refineries remaining in Australia, employing around 700 people and supplying more than 50% of Victoria’s and 10% of Australia’s fuel. The refinery can process up to 120,000 barrels of oil per day, manufacturing petrol, diesel, LPG, jet fuel, avgas, bitumen, specialty solvents for a wide range of industries, and low aromatic fuel to support the Federal Government’s petrol-sniffing prevention program.
Viva Energy to acquire LyondellBasell Australia
Viva Energy also announced on April 13 that it has agreed to acquire LyondellBasell Australia (LBA), a Geelong-based national polymer manufacturer and distributor which has its production facility located inside the footprint of the Geelong Refinery.
LyondellBasell Australia is the country’s only polypropylene manufacturer, supplying the Australian and New Zealand market with raw material for the production of diverse plastic products ranging from food packaging and medical equipment to polymer bank notes, and serving more than 60 customers across Australia, New Zealand, Asia, India, the Middle East and North America. The business is strongly complementary to Viva Energy’s refining operations, with Geelong Refinery’s propylene production utilised as the feedstock in LBA’s manufacturing operations.
LBA has a strong market position, manufacturing and importing a range of polymers with both broad market use and specialist applications. The acquisition broadens the scope of Viva Energy’s manufacturing capability, and further diversifies its product mix and marketing opportunities. The LBA business has good fundamentals and a solid operating model, with potential for growth. LBA employs approximately 100 people across manufacturing, supply chain and marketing operations, and the production facility at Geelong plays an important role in the optimisation of Geelong Refinery.
“This acquisition is another step in the development of our Geelong Energy Hub and the further diversification of our Commercial and Industrial businesses. This facility and its manufacturing capability are vital to the economies of Victoria and Australia, and can have important roles to play in Australia’s circular economy through the recycling of plastics. The acquisition of this business opens the door for innovation and the development of new business opportunities,” said Wyatt.
The transaction is for 100% of LBA through a share sale. In addition, the parties have agreed to a suite of import and distribution arrangements that will deliver Viva Energy and LyondellBasell (Global) with a long-term relationship to build the business, delivering value to both parties.
The initial purchase price is AUD15 million (USD11 million), subject to customary adjustments at completion, with an agreed earnout mechanism across a six-year period, not to exceed a further AUD25 million (USD18 million). The transaction remains subject to regulatory approvals which are expected to progress in the coming months.