Refiners to compete for diesel storage grants

A $200 million competitive grants program for diesel storage will be launched in the March quarter next year as the government works to boost security of supply in fuels and support struggling local refiners, federal Energy Minister Angus Taylor has confirmed.
  1. A $200 million competitive grants program for diesel storage will be launched in the March quarter next year as the government works to boost security of supply in fuels and support struggling local refiners, federal Energy Minister Angus Taylor has confirmed.

    Mr Taylor will tell a fuel security conference on Tuesday morning that the program will help the fuels industry implement new obligations on fuel stockpiles and reduce costs for industry.

    The federal government has also been working with the refining sector on measures that would provide a subsidy for the local production of fuels, but refinery owners Viva Energy and Ampol have made clear this month that it may not be enough to prevent their refineries, in Geelong and Brisbane, respectively, from closing.

    Between them, Viva’s Geelong plant and Ampol’s Lytton plant notched up losses of more than $110 million in the September quarter, and further losses are seen as inevitable amid the extended collapse in demand for aviation fuel and weak refining margins across Asia. The country’s other two refinery owners, ExxonMobil and BP, have also made no guarantees about the future of their plants.

    “The government recognises that Australia’s future refining sector will not look like the past,” Mr Taylor will say.

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    “However, having an appropriate level of refining capacity in Australia is important for both price suppression and local jobs.”

    The minister does not comment in the address specifically on the proposal announced in September for a refinery production payment that would provide a 1.15¢ per litre subsidy for locally produced fuels.

    Australian Workers’ Union national secretary Daniel Walton said in an interview  this month that further specific rescue measures were urgently needed for the industry to prevent closures.

    The debate comes as federal Resources Minister Keith Pitt will on Tuesday confirm the government will not trigger the Australian Domestic Gas Security Mechanism – the tool that could be used to limit Queensland LNG exports – for 2021 given there is no expectation of a shortage. But it will soon start consulting with east coast exporters for a new agreement to guarantee the domestic market is well supplied.

    Mr Pitt will also release an issues paper to kick off consultations with the gas industry on a national gas reservation scheme, as advised by his predecessor Matt Canavan in January.

    Manufacturers have been voicing concern about an apparent lack of movement on gas reservation this year, although Mr Pitt told The Australian Financial Review in September a scheme was still on the cards.

    The consultation paper stipulates that the gas reservation scheme will be prospective rather than applied retrospectively, something that gas producers have argued was crucial not to damage existing investments in supply projects. But it remains unclear whether gas fields developed to supply replacement gas to existing LNG plants would be considered as “prospective”.

    The paper asks respondents for views on reservation systems either within Australia or overseas that might work at a national level.

    Meanwhile, the government’s liquid fuel storage program will increase diesel stocks around the country by 40 per cent, or 780 million litres, Mr Taylor says, adding that will help ensure critical fuels are available for emergency services, hospitals, food and medicines distribution and mining and agriculture.

    “It will focus on strategic regional locations, connections to refineries and existing fuel infrastructure,” Mr Taylor says.

    He notes that the government will also modernise the country’s liquid fuel legislation, improve the online fuel reporting system and reduce the reporting burden on the supply industry.

    The minister says the $71.9 million Future Fuels Fund announced in the budget will also help deliver lower emissions by enabling businesses to start integrating new technologies such as electric vehicles into their fleets and by improving charging infrastructure in regional areas.

    Source: Financial Review