Oil companies to receive large incentives to keep oil refineries open, in an effort to maintain fledgling fuel security.
The Australian Government is pushing to keep the country’s remaining two oil refineries open, using the Federal Budget to announce payments to help maintain Australia’s current level of fuel security.
The number of Australian oil refineries has halved in the past seven months, putting increasing pressure on the country’s limited storage capacity.
Using transport data compiled from January to October 2020, Australia has around 21 days of diesel reserves – the country’s most consumed type of fuel – with marginally more petrol stored.
However, the estimated three weeks of diesel reserves was based on transportation needs when large areas of the country were in lockdown due to the coronavirus pandemic, and travel was heavily restricted.
At the beginning of 2021, the Federal Government pledged $200 million to boost local diesel reserves by 10 days, around the same time as oil companies announced two of Australia’s last four refineries were being closed – with the fate of a third plant in Brisbane hanging in the balance.
ExxonMobil announced it would be shutting down its Altona oil refinery, located in Melbourne’s west, transforming it into a fuel import terminal. It followed BP’s decision to close its Western Australia facility.
The two remaining oil refineries in Australia – Ampol’s Brisbane facility and Viva Energy’s Geelong plant – may end up being kept open thanks to generous government subsidies outlined in this week’s Federal Budget.
While no dollar figures have been released by energy minister Angus Taylor’s office “due to commercial sensitivities,” sources familiar with the matter told The Australian Financial Review the amount could be in the hundreds of millions.
It’s understood negotiations have yet to be finalised, with the Brisbane refinery needing the most financial support if it’s to keep its doors open.
Meanwhile, the government has committed $50.7 million to “establish a new fuel security framework,” which will determine and police fuel storage requirements, a statement from Mr Taylor’s office read.
Australia currently has around 68 days of crude oil in reserves – the base product from which petrol and diesel is refined. As a member of the International Energy Agency, Australia is meant to keep a minimum of 90 days of oil reserves.
In April 2020, the Federal Government took advantage of plummeting futures prices on the international oil market to bolster its stockpile, buying $94 million worth of crude oil from the United States’ Strategic Petroleum Reserve, where it will remain for the foreseeable future – though exactly how much oil was secured for Australia has not been revealed.
If the last two local oil refineries were allowed to close, it would render the country’s crude oil reserves effectively useless, with no way to convert the base product into fuel, and Australia would be solely reliant on petrol and diesel imports via sea shipping.