Ben Potter, 10 March 2016

Even though Australia is about to become one of the world’s biggest exporters of energy, it is trying to find a cheap way to meet its international requirement to store 90 days of petrol.

One option is to convince the International Energy Agency to count petroleum stocks “on water” – in tankers en route from Asia’s refineries – in Australia’s strategic reserves. Another is leasing or “ticketing” additional reserves. Ticketing is buying an option to take physical delivery in a crisis.

The Turnbull government wants to reduce the huge cost of lifting Australia’s strategic petroleum reserves to the International Energy Agency’s minimum requirement of 90 days’ net imports.

Meeting the minimum strategic petroleum reserve is a key requirement for maintaining membership of the powerful agency, which helps set global energy policies.

Energy Minister Josh Frydenberg met with big petroleum retailers, terminal operators and consumers on Thursday to explore ways of meeting the IEA’s requirements without spending the $2 billion that would be required to plug the gap with physical stocks.

“The government’s clear intention is to look for the lowest cost and most efficient way to maintain membership [of the IEA],” Mr Frydenberg told The Australian Financial Review.

Participants at the meeting in Melbourne included retailers BP Australia, Caltex, United Petroleum, ExxonMobil and Viva Energy Australia, big users BHP Billiton, Rio Tinto, Glencore and Qantas, terminal operators Vopak and Terminals Ltd, and industry and motorist groups.


The minister discussed petroleum reserves with IEA executive director Fatih Birol in Canberra and with US energy secretary Ernest Moniz in Washington two weeks ago. He said they showed a willingness to help Australia meet its IEA obligations.

“I think there’s a clear sense on behalf of the international community that they want Australia to retain its membership and they want to help us to find a way to get back to 90 days in a cost-effective way.”

Mr Frydenberg said that as the world’s number one coal and uranium exporter, and soon to be number one liquefied natural gas exporter, “we are seen as a very valuable member.”

The IEA requires member nations to maintain strategic petroleum reserves for release in a crisis, such as Hurricane Katrina, or the wars in Libya, Iraq and Kuwait over the past quarter century.

Australia has not held 90 days’ imports in reserve since 2012 and is the only IEA member in breach of its obligation.

Australia currently holds about 50 days’ supply based on average net daily imports of about 800,000 barrels, meaning it would cost about $2 billion at current oil prices to meet the IEA’s requirements by buying physical petroleum.

But Mr Frydenberg said the government had no intention of imposing such costs on the industry, and would continue to press for reform of the IEA, including the expansion of its membership to include large energy consumers China, India and Brazil.

Extracted in full from Australian Financial Review.