Australia's oil refineries will need government support to avoid a reliance on fuel imports

Refined fuels are the backbone of Australia's economy but the country is increasingly vulnerable to global supply shocks, with around 80 per cent of liquid fuel imported from overseas.

"Our whole logistics systems and our way of life depends on diesel," said John Blackburn, the former deputy chief of the Royal Australian Air Force.

Just over 20 years ago Australia had eight oil refineries which met most of the country's demand for refined fuel. But one by one, they were deemed economically unviable.

Six have been shuttered, only Ampol's Lytton refinery near Brisbane and Viva Energy's refinery in Geelong remain.

"At the moment society still has a need for a lot of the products that we make here," said Bill Patterson, general manager at Viva Energy's refinery.

"The ones that everyone knows about [are] gasoline, diesel, and jet fuel. So, [fuel for] planes, automobiles, and trucks.

"So it's good that we're able to meet those needs from onshore in Australia rather than just simply import everything into the country."

But only 20 per cent of our liquid fuel demand is refined domestically.

Last month, Chief of Navy Vice Admiral Mark Hammond revived the debate over Australia's reliance on fuel imports when he warned the country was vulnerable in the event sea lanes were disrupted.

The former deputy chief of the Royal Australian Air Force, John Blackburn, agrees that Australia is vulnerable, particularly when it comes to storage levels of crucial supplies such as diesel fuel.

"In Australia, as of July this year, we had 24 days of diesel stocks," Mr Blackburn said, referring to government statistics that reveal how many days' worth of refined fuels are stored around the country.

Mr Blackburn said Australia was the only member of the International Energy Agency not currently meeting its obligation for net import coverage of oil.

According to government statistics, in September, Australia had 53 days of net import coverage for oil, well below its 90-day obligation.

A shrinking sector

For years, one of the most persistent voices warning about Australia's fuel security has been outspoken Queensland MP Bob Katter.

"If we run out of fuel here for two or three months, I have to tell you, you're going to have to walk to your local supermarket in the fond hope there's been enough fuel in the transport trucks to bring the food into your supermarket," Mr Katter said.

He is an enthusiastic supporter of alternative fuels such as ethanol, which he says could be produced in Australia by a rejuvenated refinery sector.

"[The government] just sat on their hands and watched all the refineries close … [saying] they were so small, they were non-competitive, uneconomic," Mr Katter said.

"I mean, get some money and build three giant refineries that are economically viable."

At Viva Energy's refinery, Mr Patterson oversees 700 employees, dozens of massive fuel tanks and a seemingly endless trail of pipes sprawling across 235 hectares.

But Australia's last remaining oil refineries are surviving in part due to government intervention.

In 2021, as world oil prices dived due to the COVID pandemic, the previous Coalition government launched the Fuel Security Services Payment, providing a subsidy for refineries in a loss-making period.

So far, Viva Energy's refinery in Geelong has received nearly $40 million in payments. Mr Patterson says it is the only way Australia's refineries can match their foreign competition.

"They also operate in very low-cost environments, which isn't the case in Australia."

Australia's remaining refineries and the federal government are now in talks to extend support from 2027.

In response to questions from 7.30, a government spokesperson said: "Australia is fuel secure. We are now holding more stocks of aviation fuel, petrol, and diesel on land and in ports in Australia than at any time in the last 15 years."

The government also said in June of this year that it had ended the Boosting Australia's Diesel Storage Program (BADSP) after building 330 million litres of diesel storage capacity across the country for $104 million.

Ninety million litres of that diesel fuel is stored in three tanks opened last year at Viva Energy's Geelong refinery — enough to supply about a week's worth of Victoria's diesel fuel demand.

"Obviously, every bit of storage helps," Mr Patterson said.

"This is a substantial amount of storage, and it really does mean that we just have that little bit of extra fuel in case of interruptions to supply chain or other events that lead to us needing it."

As to whether Australia's refineries could keep operating without government assistance, Mr Patterson did not hesitate to answer.

"We're only asking for support when we need it, not for all the time," he said.

"And that's definitely been the case with the legislation that we've enjoyed the benefit of so far."

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