Caltex targets transport industry for growth

Caltex today confirmed growth in the market for diesel in Australia’s transport industry represents part its way forward

Caltex targets transport industry for growth
Caltex targets transport industry for growth

By Anna Game-Lopata | September 7, 2012

Caltex today confirmed growth in the market for diesel in Australia’s transport industry represents part of its way forward

fuel products company told an investor presentation in Sydney its vision is to become Australia’s outright leader in the market for transport fuels.

In particular, CEO Julian Segal says the company sees a clear growth pathway for Caltex across diesel and jet fuel products.

"Petroleum products are essential to the Australian economy," Segal says. "These products represent 35 percent of total energy consumed in Australia."

Segal says diesel has become the largest single product used, reflecting a growth of 4.5 percent per annum. The market for jet fuel is also growing at about 4 percent per annum.

Meanwhile the market for petrol has sustained a steady decline of about one percent.

With consumption currently 7 billion litres per annum and a forecast increase of 3.5 percent per annum, transport industry growth is a key driver for diesel demand.

"We see a continued vehicle fleet shift with diesel vehicle penetration increasing from 10 percent in 2001 to around 30 percent," Segal says.

This is expected to reach nearly 37 percent by 2020.

In addition growth in the resource sector and an
increasing focus on fuel efficiency is pushing demand
for diesel.

In terms of supply, Segal says Caltex is looking to a competitve sourcing strategy.

Despite the closure of its loss-making Kurnell refinery in two years and a continued decline (30 percent) in local refining overall, he says there is sufficient product supply in the region to meet Caltex’s forecast growth.

Segal points to the
long-term product supply agreement with oil and gas giant Chevron signed in July, which he says will significantly improve
the company’s import supply chain capability.

"Caltex’s security of supply will be underpinned by the long term arrangement with Chevron to source and procure all of Caltex’s ‘out of country’ product requirements including petrol, diesel and jet," Segal says

"Under the arm’s length arrangement, Chevron will procure and supply to Caltex imported product at market-based prices."

In addition, the company’s Lytton refinery, which has recorded a profit in the first half of 2012
after reporting a
loss last year, will continue to function.

Given its high value product, Segal says the decision to maintain Lytton mitigates supply chain risk during Kurnell closure.

"[The Lytton refinery] strengthens our supply and gives greater optionality," he says.

"We will continue to prioritise scoping and analysis of modest targeted investments at Lytton."

Segal adds resource driven growth and refinery rationalisation drive infrastructure related opportunities which are essential to a competitive supply chain.

While he admits the lack of rail and Australia’s large land mass means greater dependency on road transport infrastructure resulting in long lead-times and
the requirement for
a large capital commitment, Segal says Caltex is nevertheless one of three players with national import terminal coverage in 24 locations and a comprehensive offer.

"We have a large scale, cost competitive terminal, pipeline, depot and fleet infrastructure in each geography," he says.

Caltex’s reported a profit of $167 million for the first half of 2012, compared with $270 million for the first half of 2011.

Reported revenues were up 7 percent from last year to $11.8 billion.

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