Caltex job cuts expose Australia to global markets
Another day, another round of heavy job losses.
Last month it was the Kurri Kurri aluminium smelter closure, with hundreds losing their jobs, along with the drumbeat of the steady collapse of construction companies, such as Hastie Group.
Earlier this week it was a bus maker in the Hunter, Volgren, axing more than 40 jobs, with more under threat.
But that is overshadowed by the announcement earlier today, of upwards of 330 jobs at Kurnell, with Caltex deciding to shutter the refinery, and turn the site into a terminal, receiving imported product for sale locally.
Caltex is profitable, but management has decided it can become more profitable by axing jobs, and importing refined oil products, which have already been processed at a Singapore refinery owned by Chevron, one of its main shareholders. In the process, Sydney is now totally exposed to global markets, with no buffer.
The decision to close Kurnell comes hard on the heels of the closure of the smaller Clyde refinery, also in Sydney, which is owned by Shell, again with heavy job losses. As a result, Sydney - and NSW - are totally beholden to foreign suppliers.
Any supply disruption, from technical problems at offshore refineries, to piracy and war that may affect shipping lanes, will be felt in the local market within a matter of days.
Other countries which are heavily exposed to foreign oil imports have moved to establish oil stockpiles, to give them a buffer in case of major supply disruptions.
But to date, this has not even been discussed in Australia, with both Federal and state governments seemingly washing their hands of the issue, leaving it to the private sector to make decisions that are in their own best interests.
Bass Strait production and reserves are in decline, while all of the oil produced at gas fields off north Western Australia is exported. As a result, Australia's reliance on imported oil has been rising, and with the Kurnell closure, we will be relying heavily on fully refined oil.
The Caltex decision comes as oil companies around the world have been pulling their money out of refining and distributing oil, chasing easier profits from exploring and developing oil and gas reserves. And it is the same with both Shell and Caltex, since both are investing billions of dollars to develop export gas projects off Western Australia, and elsewhere.
But clearly, what is in the corporate interest, is not necessarily in the community's interest.
For Caltex, which has a large share of the local oil market, it is trying to to make sure its supply position won't be compromised with the shutdown.
At Kurnell, the refinery is to close in two years time, in the second half of 2014, with the Lytton refinery in Brisbane to remain in operation. Kurnell employs 430 workers at present, which will be cut to less than 100. On top of this, an unspecified number of contractors are also likely to lose their jobs, as operations at the refinery are curtailed.
For the workers at Kurnell, the losses are a shock, but no real surprise.The company had flagged a year ago it was reviewing operations at both the Kurnell and Lytton refineries.
The company had made a clear strategic decision: it could supply refined oil product from abroad - especially Singapore where one of its shareholders, Chevron, has a large stake in a refinery - more cheaply than by doing it locally.
Caltex has said the Kurnell refinery is set up to process 'sweet' crude oil, for example from Bass Strait, but was increasingly handling 'heavier' crude oil imports, putting it at a competitive advantage.
And the irony is that while Caltex is willing to pull the plug on refining at Kurnell, its main shareholder, Chevron, is investing in a refinery in NZ, which is increasing capacity. How does that work?