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BP to remain in Kwinana
The West Australian

BP's Kwinana refinery is being prepared for a major scheduled shutdown within months to undergo a multimillion-dollar maintenance program, a sign, sources close to the British giant say, of its commitment to the plant.

Although BP would not comment yesterday on market speculation it was planning to sell the refinery along with its nationwide service station network, sources say there had been no change to its refining strategy, suggesting it plans to hold on to the WA asset.

With a processing capacity of 137,000 barrels of oil a day and a workforce of almost 400 people, Kwinana is WA's only refinery - and Australia's biggest - and produces petrol, diesel and jet fuel.

The refinery's strategic importance would likely make it a sought-after asset if BP changed tack and decided to put Kwinana up for sale. A heavy maintenance shutdown is scheduled for the June quarter.

However, the WA and Federal governments are likely to keep a close eye on any sales process to ensure the buyer guarantees one of WA's most important fuel supply assets.

Oil majors led by Royal Dutch Shell are reviewing their downstream presence in Australia, with regular speculation they want to sell refineries and service station networks.

Shell has stopped refining at Clyde in Sydney, turning the asset into an import facility, while Geelong has been put up for sale.

BP also owns the Bulwer Island refinery near Brisbane, which processes 101,000 barrels a day.

The age of Australia's refineries - Kwinana was built in 1955 and Bulwer Island in 1965 - and the country's high operating costs are often quoted as the reasons refining margins are under pressure and companies are considering a sale or conversion into fuel import terminals. Shell's Geelong refinery, which can process up to 120,000 barrels a day, is 55 years old.

New refineries being built in Asia are also usually much bigger, giving them a scale advantage over Australian operations.

But buyers are unlikely to be easily found. Refineries typically do not suit private equity parties because of their big ongoing capital cost requirements and low profit margins. The most likely buyers are regarded as overseas parties wanting to import their oil products into Australia.