The federal government has opened talks with Australia’s four refiners over the joint development of a domestic oil reserve to back up supplies held in a strategic facility in the US.

Caltex, Viva Energy, ExxonMobil and BP have all been involved in discussions over utilising or expanding their existing storage facilities so crude can be stored locally.

Australia is looking to boost its stockpile to meet International Energy Agency fuel security rules that require emergency oil stocks equivalent to 90 days of net oil crude imports.

Energy Minister Angus Taylor said he was encouraged by early talks with the energy operators.

“There’s very good opportunities on their existing sites and underground options are another possibility that could also be looked at,” Mr Taylor told The Australian.

In NSW, Caltex’s Kurnell and Viva’s Clyde storage facilities were converted to import terminals from refineries while Exxon in Victoria and BP in Western Australia also operate facilities.

“We’re working through those discussions with the industry who have been very enthusiastic participants,” Mr Taylor said.

Caltex has said it will temporarily shut its only oil refinery, Lytton in Brisbane, in May to offset losses and will only restart it when the crude margin outlook recovers.

Acting chief executive Matt Halliday said there was momentum to consider the broader stockpile issue for Australia.

Fuel security had been “re-­energised, I think it’s fair to say”, Mr Halliday told the Macquarie Australia conference on Thursday. “As we look at restart decisions there will be very active conversations with the government as part of that contemplation.”

Mr Taylor in April said the government would spend $94m on the strategic fuel reserve with supplies initially stored in the US until Australia had developed further capacity to store its reserves.

Viva also indicated a pick-up in demand for petrol as COVID-19 restrictions are eased but expects a jet fuel slump to linger with planes grounded and consumers’ travel habits changed.

Petrol sales fell 34 per cent in April from a year earlier across its 1290 Coles Express service stations, but Viva said volumes had picked up early this month as lockdown measures moderated.

“It’s pretty early days but there are some encouraging signs that volumes are starting to improve as we see more traffic on the roads,” Viva Energy chief Scott Wyatt told the Macquarie conference.

“But I think we have a long way to go on that and it really depends on what the government does over the next few weeks.”

Jet fuel sold to airlines plummeted 75 per cent in April from a year ago.

While slightly better than its forecast for an 80-90 per cent slide, Viva said it was uncertain whether the aviation sector would return to pre-pandemic levels as customers’ habits changed.

“What we’re expecting is domestic will come back first and obviously won’t necessarily come back to where it was because obviously there will be some restrictions still in place and people will have adjusted their travel habits. And then international is no doubt going to be sometime down the track,” Mr Wyatt said.

Extracted from The Australian

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