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AUSTRALIAN WELDING | DECEMBER 2016
Australian Pressure Equipment
Industry Developments By Roger Griffiths, WTIA President and Chairman of AS/NZS 3788 Revision Committee. The Australian oil refining industry is declining in the face of increased international competition from new Asian refineries, built to an unprecedented size. It comes as little surprise then that Australia’s pressure vessel fabrication industry could also be on the decline. Some larger companies are already struggling or have closed, many smaller fabricators are having to diversify to survive. The situation is made worse by the frequent employment of overseas fabricators, who often deliver sub-standard products. This is all exacerbated by a lack of development in Australian Standards, partly because the Government, without fully understanding the place of Standards in industry and society, has withdrawn its support for Standards Australia. Australian Oil Refining: An Industry in Decline Prior to 2012 there were seven major Australian oil refineries, with a total capacity of approximately 760,000 barrels (bbl) per day (120 million litres). Three refineries closed between 2012 and 2015, with four now remaining: Mobil Altona, BP Kwinana, Shell Geelong (sold to Viva), and Caltex Lytton. The long-term future of these remaining refineries must be in doubt. While it is understood that all four refineries are profitable at the moment, the industry is highly cyclical. An economical source of feedstock is regarded by some as key to the historic profitability of the Altona refinery, when others struggled to break even. All seven refineries were built in a commercially ‘easy’ or protected environment (such as the Bass Straight crude allocation and Product Exchange). This protection was removed in the late 1980s. Globalisation then put increasing commercial pressure on the
refineries. The major competition now comes not from within Australia, but from giant refineries such as the Reliance Refinery in India, which has a capacity of 1,200,000 bbl per day, some 60% greater than the total peak Australian production. The advantages of economies of scale in refining cannot be overstated. Just before the BP Brisbane refinery ceased production, the Federal Treasurer announced that Australia was not complying with international obligations in regard to oil stockpiles. To address this, a levy on fuel was proposed, possibly 2c per litre. Where this fuel was to be stored was not discussed, and, with the closure of the Brisbane refinery, tankage capacity of approximately two million barrels (320 million litres) was marked for demolition - half of that in just two tanks alone. The irony is that, had the refinery been able to squeeze an additional 1cent per litre in margin, it would almost certainly have stayed in operation. This is a simple description of a complex situation. Half the refineries in the United States (US) have a
capacity of less than 100,000 bbl per day, and not many are much over 200,000 bbl per day. It may be that the extensive US pipeline network allows them to obtain feed at a cost that keeps them profitable. However, the crude capacity of a refinery is only an approximation to the ‘size’ of the operation—the number and complexity of processes is of at least equal importance. Government policy also plays a part, with refineries in South Africa and other parts of the world acknowledging that they remain in business largely due to a protected environment. While ‘Free Trade’ is undoubtedly essential for the prosperity of the human race, it does seem that there must be a path—a middle road—that permits governments to provide the infrastructure, including a financial environment, in which their citizens can prosper. Australian Fabrication The fact that major fabricators have closed recently is not in itself highly unusual: this has been the case for the whole of my career. However, many of the major Australian fabricators view overseas