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Australian fuel refiner Viva Energy (ASX: VEA) has completed the restart of the Residue Catalytic Cracking Unit (RCCU) at its Geelong refinery, restoring production to more than 90 per cent of normal capacity after a fire broke out in the facility's Alkylation unit in April.
The RCCU restart marks a significant milestone in the refinery's recovery, but the damaged Alkylation unit remains isolated and is expected to stay offline throughout 2027, limiting the facility's ability to convert LPG into gasoline.
Preliminary findings indicate the fire on 15 April this year was caused by a piping failure that released and ignited fuel within the Alkylation unit.
The investigation into the root cause remains ongoing, and no independent or regulatory findings have been published.
Viva Energy says it is assessing options to repair or replace the Alkylation unit.
"While this will be progressed with highest priority, it is expected that the refinery will operate without the Alkylation unit throughout 2027 based on current assessment of the damage sustained," says the company.
"The company continues to investigate the cause of the incident and is working with insurers regarding property damage and business interruption.
"While investigations remain ongoing, preliminary information indicates that the incident was due to failure of a section of piping within the Alkylation unit, releasing fuel which ignited.
"The immediate response to the incident by our refining team contained the fire and minimised the impact to people and the rest of the plant."
The fire's impact on refining economics has been substantial with Viva Energy reporting a Geelong refining margin of US$23.90 per barrel for the April-May on refining intake of 6.5 million barrels, reflecting both reduced production volumes and lower margin yield in the wake of the incident, compounded by rising crude premia.
The company has not disclosed any dollar estimate of property damage, insurance recovery expectations, or the projected financial cost of operating without the Alkylation unit through 2027.
The Geelong refinery is one of only two operating refineries in Australia and has been the subject of $500 million in gross upgrades, offset by $158 million in government grants.
Its continued operation is underpinned by the Federal Government's Fuel Security Services Payment (FSSP), a subsidy mechanism designed to support domestic refining capacity.
In March this year the government increased the FSSP Margin Marker collar from 6.4c per litre ($10.20 per barrel) to 10c per litre ($15.90 per barrel), while the cap rose from 4.6c per litre ($7.30 per barrel) to 8.2c per litre ($13 per barrel).
The maximum support rate remained unchanged at 1.8c per litre ($2.90 per barrel).
Viva Energy says the RCCU is now operating at steady state and that the refinery continues to supply transport fuels across south-eastern Australia while the Alkylation unit undergoes assessment ahead of any repair or rebuild timeline.
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