This forecast compares with a replacement cost of sales operating profit (RCOP) in 2004 of $348 million.

Caltex refiner margins averaged more than US$11 per barrel of oil from June 30 2005 to October 31, compared with only US$7.28 per barrel in the first half of the year.

These higher margins resulted from continued strong demand for fuels in the Asia Pacific region coupled with US production shortages following Hurricane Katrina, the company said.

“There is real momentum in the business and we feel confident about the outlook,” managing director Dave Reeves said.

“Our strategies are working and we continue to build further competitive edge in key areas and the external environment, while remaining volatile, looks favourable.”

But Reeves said production was affected by high shutdown activity, particularly in the first half of 2005, as the company performed routine maintenance and preparation for clean fuels production.

Sales this year were expected to be about 10.3 billion litres, compared with 10.5 billion litres in 2004.

By the end of the year, Caltex would have invested about $540 million in refineries and fuel storage terminals, including about $300 million on clean fuels projects.

“The clean fuels project will cut air pollution by reducing benzene in petrol and sulphur content in diesel,” Reeves said.

But the tight labour market and availability of equipment and materials has delayed construction of the new processing plants planned for completion in this quarter, according to Reeves.

The benzene reduction plants at the Kurnell refinery in Sydney and the Lytton refinery in Brisbane, and the Lytton refinery diesel sulfur reduction plant, are now expected to be onstream in the first quarter of next year. Meanwhile, the Kurnell diesel sulphur reduction plant is expected to come online around the end of the first quarter.

These delays mean the estimated budget for the four-year project had risen to between $480 million and $495 million.

He said these financial effects were included in the 2005 outlook.