Blackburne told reporters major investment forced by reduced petroleum sulphur content laws could lead to the closure of one or two of Australia's eight refineries.

"If that additional capital investment is excessive companies won't make it, and that will probably be a catalyst for some refinery closures," he said.

Earlier he told the Australian Institute of Petroleum that if Australia's refineries were established today there would be four or less plants, instead of eight refineries with a small average capacity of around 100,000 barrels per day.

"I think the challenge for the Australian industry is to find a way to go from eight littles to at least four medium size refineries over a 10 maybe 20-year time frame," he said.

Blackburne said a government report on reducing sulphur levels was expected tobe completed in 1999 and there was a risk it would recommend sulphur content levels that would require a large amount of capital investment at refineries.

Caltex is half-owned by a joint venture of Chevron Corp and Texaco Inc. It operates the 116,000 barrel per day Kurnell refinery in New South Wales and the 100,000 barrel per day Lytton refinery in Queensland.

Oil majors Mobil and Royal Dutch/Shell announced in August that they were merging their four Australian refineries, but no closures were expected as a result of the joint venture.

Mobil owns the 70,000 barrel per day Port Stanvac refinery in South Australia and the 130,000 barrel per day Altona refinery in Victoria.

Shell owns the 123,00 barrel per day refinery at Geelong in Victoria and the 90,000 barrel per day refinery at Clyde in New South Wales.

BP Australia Ltd, a local unit of British Petroleum Co Plc owns the 69,000 barrel per day Bulwer Island refinery in Queensland and the 125,000 barrel per day Kwinana refinery in WesternAustralia.