Refinery upgrades could ease threat of future fuel supply blockages

Fuel industry experts are anticipating a budget focus on fuel.

In short:

Fuel refinery upgrades have been flagged as a possible option for energy security reform.

Energy Minister Chris Bowen has made clear energy security remains a key focus for the government.

What's next?

The treasurer will hand down the federal budget on May 12.

The global oil crisis has dramatically exposed Australia's fuel vulnerabilities.

Attention is turning to how Labor will use the federal budget to shore up Australia's liquid fuel supply.

The government has signalled energy security will be a key pillar of the budget.

Energy Minister Chris Bowen has been careful not to close the door on options.

He has refused to foreshadow any specific new measures ahead of the budget.

"It's no secret we're in ongoing conversations about fuel security and what sensible things can be considered," he said.

"There's a budget coming up. If there are sensible measures, the government will consider them."

Extra domestic storage capacity

A pathway to bolstering Australia's domestic fuel stockpile is widely anticipated to be a feature of the budget.

The Strait of Hormuz blockade has revealed domestic supplies and stockpiles as a key vulnerability.

Mr Bowen said Australia had 44 days' worth of petrol in reserve.

Australia would have 60 days' worth of fuel supplies in reserve under an $800 million Coalition proposal.

The Coalition has vowed to increase minimum stockholding obligations for fuel importers.

That policy would come at a cost of $6 billion.

Australian Institute of Petroleum chief executive Malcolm Roberts said most moves to increase Australia's fuel stockpile would cause a fuel price increase.

"So, there's a tricky balancing act here."

Resources Minister Madeleine King has previously said it would be an expensive undertaking for Australia to reach the 90-day commitment.

"It is estimated to cost about $20 billion if you were to store the suggested amount of fuel for that amount of time," she said.

Will refineries be funded?

A fire at Geelong's Viva refinery highlighted the vulnerability of Australia's onshore refining abilities.

While the government has talked down the prospect of helping to fund a new refinery, sector insiders suggest upgrades to an existing refinery could be on the table.

Earlier this month, the federal government announced it would open loans through the National Reconstruction Fund.

Chris Bowen has revealed little about what energy security measures will be funded.

It led to some speculation the door was being left ajar for an announcement of government backing for a new oil refinery.

But the prime minister has said his government's attention would be focused on supply, rather than refining.

"We're looking, of course, across the board. Anything that we can do, any constructive proposals, we're open for dialogue," Anthony Albanese said.

"What we are concentrating on at the moment isn't something that is time-lengthy for obvious reasons," he said.

"What we are doing is concentrating on supply."

Australia's two existing refineries have been working full pelt to ensure that supply is kept up.

In Brisbane, the Ampol refinery has been given $25 million to produce renewable diesel.

"You can drop in 100 per cent renewable diesel into an existing engine and use it, so it's not an additive that gets blended in, it's a genuine replacement fuel," Mr Roberts said.

While not an immediate fix to the fuel crisis, supporters of the project suggest Australia's other petrol refinery could be a candidate for similar federal support.

The Queensland project is expected to produce 20 million litres of diesel every year by 2028.

Institute for Integrated Economic Research Australia board member John Blackburn said biofuels were a good pathway.

A $1 billion pathway

Mr Blackburn said reducing demand would ultimately be the best approach to improving energy security.

The energy minister said there would be some new money for renewable energy.

But Mr Blackburn said he would not be surprised by funding announcements around electrification.

Ampol's Lytton refinery has been given $25 million to produce renewable diesel.

"What you have to do is look at the whole thing as a system and, so, the very first thing you start to look at is how do we reduce demand," he said.

"The major way of doing that is electrification."

But he said that process would take decades.

Mr Blackburn suggested a quicker process could be upgrading local refineries.

An IIERA report indicated that work could be done for between $500 million and $1 billion per refinery.

"We export a lot of condensate, which is processed overseas into jet fuel and diesel," Mr Blackburn said.

"So there's stuff we could do there."

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