Australian government to support domestic fuel supplies

The Australian government has moved to secure the country’s long-term fuel supply with a $211-million (Aus.) investment in building new domestic fuel storage and backing local refineries to remain open where commercially possible (OGJ Online, June 20, 2020).

The announcement, made by Prime Minister Scott Morrison, is part of the 2020-21 federal budget.

The support has three elements:

• An investment of $200 million in a competitive grants program to build an additional 780 megaliters of onshore diesel fuel storage,
• Creation of a minimum stockholding obligation for key transport fuels, and
• Support for the petroleum refining sector by entering into a detailed market design process for refinery production payment.

Australia has been fortunate not to have experienced a significant fuel supply shock in over 40 years, Morrison said. “[However] the events of 2020 have reminded us that we cannot be complacent. We need a sovereign fuel supply to shield us from potential shocks in the future,” the Prime Minister said.

Minister for Energy and Emissions Reduction, Angus Taylor, said the government recognized that Australian refineries are under significant pressure and is committed to working with the sector to ensure it has a long-term future.

Taylor said the construction of diesel storage will secure supplies of the fuel while a minimum stockholding obligation will act as a safety net for petrol and jet fuel stocks and increase diesel stockholdings by 40%. The country’s current stock holdings include around 20 days of diesel fuel, 25 days of petrol, and 27 days of jet fuel.

The government scheme will introduce minimum supplies of diesel for 28 days with 24 days for petrol and jet fuel. In return, participating refineries will receive 1.15¢/l.

For refineries to receive support, they will be required to commit to stay operating in Australia.

The news comes 1 week after refiner Viva told shareholders it was considering closing its Geelong refinery about 40 km west of Melbourne in Victoria due to low prices and the fall in fuel demand brought about by pandemic.

The domestically focused package also builds on the Australian government’s move to purchase up to $94 million worth of crude oil at record low global prices to be stored in the US Strategic Petroleum Reserve for access during a global emergency.

Minister Taylor added that the government will work with industry over the next 6 months on the legislative and regulatory design of the package.