Caltex Australia (ASX:CTX) has announced today it intends to continue a major expansion of its fuel terminal at Port Hedland in Western Australia in a move set to increase supply capability to the resource-intensive state's diesel market.

The petroleum giant said the new investment will provide two large 20 million litre diesel tanks and a road tanker loading facility. There is also provision for further investment in petrol storage if required.

Transfield Services has been awarded the contract for construction, which is expected to commence in September this year. The terminal is slated to start operations in late 2011.

Mike Raleigh, Caltex's National Manager Distribution, said the project was part of the company's overall infrastructure improvement program and ongoing commitment to the Australian market.

"We currently have a small presence in supplying diesel to the north west of Australia, however meeting the needs of existing and potential new customers will require additional storage capacity to ensure reliable supply. This project will ensure secure, reliable and more cost-efficient supply to our customers for many years to come," he said.

Caltex is seeking opportunities to expand its supply chain capability throughout Australia under its infrastructure improvement program.

Recent projects completed include the commissioning of a second diesel hydrotreating unit at the Lytton refinery and a 27 million litre diesel tank at Mackay in Queensland. The company has now commenced construction of a second 27 million litre diesel tank at Mackay and a second 15 million litre diesel tank at Gladstone to meet the growing demand of the mining industry.