Viva Energy to restart Geelong refinery this week, alkylation unit offline
- Geelong's RCCU to operate at over 90% capacity
- Alkylation unit isolated and offline, to affect LPG to gasoline conversion
- Refinery expected to operate without alkylation unit throughout 2027
- Viva Energy shares down 3.8%
Australian fuel retailer Viva Energy said on Tuesday its Geelong refinery was expected to return to more than 90% capacity this week, but said its alkylation unit has been isolated from refining operations and would remain offline.
Viva said work at a key processing unit of the refinery, the Residue Catalytic Cracking Unit (RCCU), was completed and that operations will resume this week at over 90% of normal capacity, more than two months after the unit was shut down due to a fire.
However, the outage at the alkylation unit will affect Viva's capacity to convert liquefied petroleum gas (LPG) into gasoline. Viva said it was assessing options to repair or replace the alkylation unit, but expects the refinery to operate without it throughout 2027.
The fuel retailer also added that preliminary information indicated the April 15 fire was caused by a failure of a section of piping within the alkylation unit, which released fuel that ignited, disrupting petrol production.
The alkylation unit outage would hurt margins by reducing the refinery's capacity to convert LPG by-products into gasoline, Jefferies analysts said in a note.
"In the interim, as well as production being impacted, there will be a margin drag, because VEA will need to purchase alkylate that it was previously getting as a byproduct without cost and use it as a feedstock for premium gasoline and AVgas."
Refining margins at Geelong were $23.9 per barrel for April and May, Viva said, although it was below the Visible Alpha consensus of $29.7 per barrel for the quarter ending June 30.
"These results reflect reduced production and lower margin yield following the incident as well as increasing crude premia through the period," Viva said.
Shares of the fuel retailer slipped as much as 3.8% to A$2.050 in afternoon trade in Sydney, compared with a marginal drop in the ASX200 benchmark index.
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