Caltex Scanning the Energy Horizon

As the world moves towards cleaner fuels in coming decades, Caltex CEO Julian Segal said natural gas, renewable power and biomass would become the ”new oil” in decades to come, posing a threat to many traditional refiners. But the company believes the CPRS as it stands could actually lead to an increase in petrol emissions.

Clancy Yeates in Sydney Morning Herald (6 November 2009):

CALTEX’S chief executive, Julian Segal, has conceded the traditional business of oil refining is likely to lose its relevance as the world’s energy mix changes.

In an outline of how Caltex plans to survive under climate-change policies, Mr Segal also said the company was ”scanning the horizon” for opportunities, as big oil producers exit the retail market.

As the world moves towards cleaner fuels in coming decades, Mr Segal said natural gas, renewable power and biomass would become the ”new oil” in decades to come, posing a threat to many traditional refiners.

Companies that looked beyond oil refining would be the main winners, Mr Segal said. He nominated growth in biofuels as a potential growth area for the company.

He called on the Government to back biofuels such as ethanol, and said the company was concerned about the impact of future excise changes.

”There is no coherent policy framework for biofuels development and we hope the Federal Government’s energy white paper will address this issue,” Mr Segal said in Sydney.

He said the carbon pollution reduction scheme would send only a weak signal to drivers, and called on the Government to encourage people to buy more fuel-efficient vehicles.

Another response by Caltex to the changing environment has been to expand its share in the retail end of the market, where it is awaiting the competition watchdog’s approval on a deal to buy more than 300 petrol stations for $300 million from ExxonMobil.

Caltex shares fell by 1 per cent, to $9.95.

Source: www.smh.com.au

Here’s Caltex position on CPRS, from its website:

Caltex Australia believes the treatment of emissions intensive trade exposed (EITE) industries under the proposed Carbon Pollution Reduction Scheme (CPRS) needs to be reviewed, while its treatment of motorists is flawed and could actually increase petrol emissions. Instead, Caltex believes an emphasis needs to be placed on complementary measures for motorists.

Does Caltex support an emissions trading scheme?

Yes, Caltex sees an emissions trading scheme of some kind as an important tool for reducing point source greenhouse gas emissions. However, the proposed CPRS is flawed and needs major changes before being implemented.

How long does Caltex think the scheme should be delayed?

The scheme should be delayed until the design is right and until economic conditions return to normal. There should also be time for a trial period so businesses can test the operation of scheme and their business systems.

What is wrong with the scheme’s treatment of EITE industries?

Caltex would need to purchase $25 to $40 million of permits for carbon emissions from its two refineries each year, and that’s assuming we receive 60 per cent of our permits for free. Yet our direct overseas competitors, such as refineries in Singapore, would have no carbon costs, so we could not pass on our carbon costs. This would mean a loss of international competitiveness and effectively impose a new tax on business.

What are Caltex’s refinery emissions?

Caltex’s two oil refineries directly and indirectly emit about 2.5 million tonnes of carbon dioxide equivalent (MtCO 2e) each year, about 0.4% of Australia’s total emissions.

What does Caltex propose for EITE industries like oil refining?

Caltex proposes that activities such as refining receive a 100 per cent allocation of free permits until such time as our international competitors face equivalent carbon costs.

What are the emissions from the use of petroleum products, such as transport?

In2006, a total of 115 Mt or 20% of Australia’s total emissions was from the use of petroleum products, including petrol, diesel and jet fuel. Transport use was 14%.

Why does Caltex believe motorists should be removed from the CPRS?

Caltex will have to buy permits for customers’ carbon emissions, then charge them back to the customer. However, the government has proposed a reduction in the fuel excise related to carbon cost which effectively removes private motorists and some small businesses from the scheme. In fact, emissions from petrol would increase be higher until 2025 than without the CPRS.

How much would Caltex have to spend to buy customers’ carbon permits?

Based on the CPRS design, Caltex would have to purchase between $0.9 and $1.6 billion in permits for our customers’ emissions each year.

How would the CPRS actually increase petrol emissions?

For the first three years and several years beyond that, the excise reduction for petrol will actually be greater than carbon price being imposed. That means petrol prices will actually go down and emissions will go up. By 2025, petrol suppliers will have churned $20 billion in permits for no environmental gain.

What about larger diesel vehicles?

We don’t propose changing the CPRS carbon cost proposals for on-road vehicles over 4.5 tonnes or off-road vehicles in various industries.

What should be done instead of including motorists in the CPRS?

Caltex proposes voluntary targets for carbon emissions from vehicles, government incentives for consumers to purchase low-emissions vehicles through a “cashback” (feebate) scheme, funding for cleaner vehicle technology together with greater reliance on alternative fuels, and investing further in public transport and better land use planning.

 Source: www.caltex.com.au