Australian government working to bolster domestic fuel security

The Australian Government has announced plans designed to enhance the country’s domestic fuel security and ease pressure on the nation’s oil refineries.

The Minister for Energy and Emissions Reduction, Angus Taylor, has opened a Request for Information (RFI) process to identify opportunities to increase Australia’s domestic fuel storage capacity.

The RFIs are being sought from the industry on potential storage projects that will enable the government to examine different volume, location and fuel storage specifications. This will help form the next steps for exploring storage opportunities to be announced later in the year. Submissions for the RFIs will close July 10.

Taylor added that the government is working to support the local refining sector in the short and medium-term.

He said temporary changes to diesel standards will be allowed to enable all Australian refineries to utilize excess jet fuel supplies. This, he said, will ease the storage pressures currently being felt by refineries from the drop in demand for fuel products as a result of COVID-19 lockdowns.

The temporary changes to the diesel flashpoint have been supported by all State and Territory agencies, fuel refiners, car and truck manufacturers and clean air experts.

Additionally, the government has begun a long-term strategic study of the refining industry. The study will look at the impact of oil market conditions, fuel security implications, and the interconnection of refineries on other industries and local communities. This work will assess the state of the industry and identify options to address emerging issues, with the objective of maintaining and enhancing the long-term fuel security of Australia.

The announcement follows a move in April which saw the Australian Government establish its first government-owned oil reserves for domestic fuel security. The plan aims to take advantage of dramatic falls in global oil prices and build on a historic agreement with the United States to access the US Strategic Petroleum Reserve (SPR) and store the crude in the US.

Global oil prices have hit new lows due mainly to a significant drop in demand caused by the COVID-19 pandemic and a lack of cost-effective long-term storage options. The US SPR is amongst the world’s most cost-effective long-term oil storage facilities.

Australia has been negotiating access to the SPR since 2018, with Minister Taylor and US Energy Secretary Dan Brouillette signing the first arrangement of its kind to facilitate the deal in March (OGJ Online, Mar. 9, 2020).

Australia will spend $94 million to buy oil at the current low global prices and has access to hold oil in the US SPR for an initial period of 10 years.

At the end of February, Australia had 81 days’ worth of oil supplies, including 25 days of stocks in overseas ports and in transit to Australia.

The oil held in the SPR will count towards Australia’s IEA 90-day stockpiling commitment.