Another refinery bites the dust as fears about fuel security rise

Altona refinery closure pumps up fears about farm fuel security

A DYING BREED: Oil refineries were once prominent in Australia but are now a dying breed.

A DYING BREED: Oil refineries were once prominent in Australia but are now a dying breed.


Australia will soon have just two local oil refineries as jitters over fuel security grows.


The closure of Melbourne's Altona oil refinery has added to growing alarm about the security of liquid fuel supplies in Australia.

ExxonMobil said the Altona refinery, which has been operating for more than 70 years, will close and be converted into a fuel import terminal.

The company said the Altona refinery, Australia's smallest, was no longer considered economically viable following an extensive review.

The review considered the competitive supply of products into Australia, declining domestic crude oil production, future capital investments and the impacts of these factors on operating earnings, company chairman Nathan Fay said.

The closure announcement came just days after the federal government released a future fuels strategy which ruled out subsidies to encourage people to buy electric vehicles.

Australia will soon have just two refineries after BP announced in December the closure of its Kwinana refinery in Western Australia and its conversion into an import terminal.

Federal energy and emissions reduction minister Angus Taylor described the Altona closure as "extremely disappointing".

The National Farmers Federation has told the federal government it needs to do more to ensure the future security of diesel supplies by ensuring Australia retains a significant capacity for onshore oil refining.

Around 90 per cent of Australia's liquid fuels is imported, mainly from south-east Asia.


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As part of last year's budget the federal government announced a fuel security package aimed at both increasing in-country fuel storage capacity and propping up local refineries.

Federal grants totalling $200 million are now available to lift diesel storage in regional areas by 780 megalitres with applications closing on February 22 and work expected to begin by mid-2021.

Australia needs to hold about 40 per cent more diesel than current levels to meet its commitment to comply with the International Energy Agency stockholding obligation - equivalent to 90 days of worth of imports - by 2026.

Recently the federal government took advantage of low oil prices to buy 1.5 million barrels of oil and hold them in the US Strategic Petroleum Reserve.

It also brought forward to January 1 a support payment to local refineries of a minimum one cent per litre and said it would pick up the $83.5 million estimated cost for the first six months.

NFF chief economist and general manager for trade Ash Salardini said recently the COVID pandemic had heightened farmer concerns about the potential for serious disruptions to fuel imports.

Mr Salardini said at some point it would become uneconomic to keep stockpiling fuel and being able to produce a certain percentage of our own fuel would ensure critical activities like farming would be able to continue if overseas supply chains were badly disrupted.

The quality of stored diesel also degraded over time and stocks would probably need to be turned over every 12 to 18 months, he said.

Mr Salardini said the constant talk now about emerging low-emission fuels including hydrogen were also causing fears about the long-term future availability of diesel.

"Is hydrogen really going to be around in 10 years time, 20 years time, 30 years time, how long will it take the rubber to hit the road with hydrogen?" he said.

As an industry that relied on diesel for most of its energy, agriculture needed a secure supply of liquid fuel to ensure its operations could continue uninterrupted, he said.

The story Another refinery bites the dust as fears about fuel security rise first appeared on Farm Online.


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