MELBOURNE (Reuters) – Ampol Ltd ALD.AX is considering closing the Lytton refinery, one of four Australian refineries, as it has suffered heavy losses due to falling fuel demand driven by the coronavirus and competition from large Asian factories.

Ampol, formerly known as Caltex Australia, was able to shut down Lytton despite a recent A $ 2.3 billion ($ 1.6 billion) offer from the Australian government incentives to the industry to keep the country’s refineries open for national security.

Ampol shares rose as much as 2.3% after marking the refinery review, outpacing gains in the broader market .AXJO.

“We really appreciate the government acknowledging with the proposed package the challenges facing the refining sector, … but we have to be realistic about the extreme structural stresses facing Lytton,” Ampol Chief Executive Matt Halliday said in an interview.

Ampol on Thursday reported an A $ 141 million loss at the factory so far this year, worse than analyst expectations.

“The demolition of demand and oversupply that we have seen … presents very challenging margin prospects,” Halliday told Reuters.

“That is on top of the pressure we face in an international context. Refinery (Australia) is relatively small and relatively old. “

Ampol said it would review the future of the Lytton plant, located in the state of Queensland, in the second quarter of 2021, considering whether to close it, turning it into a fuel import terminal as it did with the Kurnell refinery in 2014, continuing existing operations or piloting a model. another operation.

“Lytton’s larger-than-expected loss for Q3 reflects a combination of weak refining margins and the structural aspects of its relatively high fixed cost base,” said RBC analysts in a note.

Energy Minister Angus Taylor said in emailed comments that the government is working with Ampol and industry on its fuel safety package.

Analysts expect Ampol, which fended off a takeover offer earlier this year, shutting down Lytton to boost profits.

Rival Viva Energy Group Ltd VEA.AX last month it also warned it would close its refinery in Geelong, near Melbourne.