Ampol, IFM Investors and Graincorp warn a $3bn Queensland low carbon fuels refinery hangs in the balance as pressure grows on the Albanese government to back a domestic biofuels industry that would ease a reliance on imports by 2040.
Transport Minister Catherine King has mandated that biofuels be blended into Australia’s fuel supplies, stoking concerns the higher cost of the green alternative could eventually be passed through to consumers and businesses.
Ampol, IFM Investors and Graincorp are planning Australia’s largest liquid fuel manufacturing project next to the existing Lytton refinery in Brisbane, tapping locally sourced feedstocks like canola to produce low-emissions fuels at scale.
Typically biofuel mandates fall into one of three categories: volumetric mandates with set quantities of biofuel to be blended each year; percentage-based mandates prescribing a minimum share of biofuels in the fuel mix; and low-carbon fuel standards tied to emissions cuts.
The three corporates have told the government they want a volumetric target, starting at 300 million litres in 2029, rising to 1.2 billion litres in low carbon liquid fuels by 2032.
The target would be met by setting a sustainable aviation fuel target of 5-10 per cent of jet needs with renewable diesel making up the volume requirement at up to 2 per cent of diesel demand.
Building the refinery would create 1000 jobs during construction, 150 permanent roles and strengthen Australia’s fuel security, the companies said.
“Policy direction by late 2026 and legislative certainty in 2027 is critical to support investment decisions and enable domestic projects to supply the market from 2029,” the companies said in a joint submission to the government’s Securing Australia’s Cleaner Fuels Industry consultation.
Market uncertainty was becoming an issue given the policy impasse, the companies said.
“For example, construction firms are showing reluctance to fully commit resources to continued momentum, banks are uncertain about whether the industry will be secure enough to lend into. Meanwhile, feedstock suppliers are being approached by foreign producers to secure their future at a cost to our own energy independence and security.”
Produced from renewable feedstocks such as crops, waste oils and animal products, products such as ethanol, biodiesel and sustainable aviation fuel (SAF) are mostly more expensive than conventional petroleum-based fuels and are yet to be manufactured at scale here.
Most low-carbon liquid fuels are imported but it’s hoped that domestic production could displace 19 per cent of imports by 2040 and 47 per cent by 2050 if the government proceeds with the investment in refining and infrastructure.
Biofuel mandates have previously attracted criticism for imposing higher fuel costs on industry, particularly in the aviation sector where SAF usually costs between two and five times more than fossil jet fuel.
Virgin Australia has previously backed the government’s commitment but warned against repeating “the mistakes of mandate-oriented solutions in Europe”, where airlines say mandatory SAF procurement increased operating costs and pushed up fares.
Ampol, IFM and Graincorp said Australia remains heavily dependent on imported liquid fuels and exposed to global supply disruptions and geopolitical instability, underlined by the current Strait of Hormuz turmoil in oil and diesel markets.
A domestic production multiplier should recognise “additional fuel-security, supply-chain and economic benefits of Australian production” while still keeping access to imports.
Labor is hoping the decade-long, $1.1bn Cleaner Fuels Program will stimulate private investment in Australian production of low-carbon liquid fuels, such as renewable diesel and SAF.
The consultation will canvas how the scheme would operate, including which parts of the fuel supply chain would abide by the mandate, when, and how blending requirements would ratchet higher over time.
Extracted in full from: https://www.theaustralian.com.au/business/green-refinery-build-hangs-in-balance-amid-labor-mandate/news-story/da13b68be66f13d5434b1858c69210ba
