The closure of one of Australia’s few remaining oil refineries is piling pressure on the Morrison government to confront the country’s “severe fuel insecurity” that could be eased with a more aggressive push to lower emissions vehicles, according to a leading business group.

ExxonMobil confirmed on Wednesday its Altona refinery in Victoria, operating since 1949, would close and be converted to a fuel import terminal.

The closure comes less than a week after the Morrison government released a draft “future fuels” strategy that ruled out incentives to drive Australia’s lagging take-up of electric vehicles.

The Altona closure will be the sixth refinery to shutter since 2003 and will soon leave Australia with only two operating refineries. BP announced in December its Kwinana refinery in Western Australia would also convert to an import terminal, with production due to end within months.

The energy and emissions reduction minister, Angus Taylor, said the closure was “extremely disappointing” and the government’s thoughts were with the plant’s 300 staff and their families and community.Advertisement

He said the closure would not negatively impact Australia’s stock of fuels.

In the 2020 budget the government attempted to head off closures by introducing a subsidy to refineries on each litre of fuel produced, dependent on them remaining open.

The chief executive of national employer association Ai Group, Innes Willox, told the Guardian in a statement the closure was not just a blow to workers, but also for the “wider industrial ecosystem in which our refineries are embedded”.

“Beyond petrol and diesel, a range of petrochemicals are critical inputs for many other businesses. We don’t want to see a wider collapse,” he said.

“We also have to confront our severe fuel insecurity. Not only is Australian refinery capacity plunging, but most of the oil comes from overseas. Any future disruption to global supply chains would see Australia rapidly grind to a halt unless we take far-sighted action.

“A more aggressive push into electrification, hydrogen and bioenergy can provide more sustainable security over time. But viable long-term solutions need to tie together climate, energy, industry and transport strategies.”

Willox said the closure “adds to the pressure on governments to make far-sighted and clear-headed decisions to rebuild Australia’s industrial and economic recovery.”

“We will not create the jobs of the future we all crave if we don’t get the basic building blocks right,” he added.

ExxonMobil said the closure had come after a review that looked at declining domestic crude oil production and future capital investments and the impacts of those on profits.

The chairman of ExxonMobil Australia, Nathan Fay, said the closure decision was “not a reflection” on the government’s support to refineries.

An interim review of Australia’s liquid fuels security produced by the government’s energy department in 2019 concluded the country’s four refineries “are expected to remain viable in the foreseeable future” but that this depended on company investment strategies.

Almost all of Australia’s oil supply, as well as refined products, is imported. The 2019 review said in 2017-18 Australia imported the equivalent of 90% of the refined product used.

The report noted that development of alternative technologies and viable fuel switching was being “left to the market” in Australia.

This was evident in the low uptake of electric vehicles in Australia, the review said, with Australia lagging far behind other countries that had introduced fuel efficiency standards and incentives for lower and zero emissions vehicles.

In 2014, the government’s Climate Change Authority recommended an emissions standard for vehicles of 105g/km of carbon dioxide, which was almost half the vehicle average at that time.

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