Struggling oil refiners are in talks with the federal government to secure a rescue package by the end of the year amid warnings the proposed six-month timeframe may be too long to avoid plant closures and job losses.
As travel bans gut fuel demand and send losses spiralling across the country’s four remaining oil refineries, Energy Minister Angus Taylor is leading discussions to develop a suite of measures, including competitive grants and a 1.15¢-per-litre production payment for locally made fuel, to support the domestic operators.
The minister’s office and refiners have already started discussions on the design of the payment, as part of consultations the government initially said would take up to six months.
ExxonMobil, the owner of Melbourne’s Altona refinery, said while the proposed support package was an important first step, rolling it out as quickly as possible was vital, as Victoria’s ongoing lockdowns placed “unprecedented” pressure on the industry.
“The proposed six-month consultation timeframe is too long given the near-term challenges faced by all refineries,” an Exxon representative told The Age and The Sydney Morning Herald.
“We are working closely with the Australian Institute of Petroleum and the federal government to implement the first part of the fuel security package by January 2021.”
A government source, familiar with the refining industry discussions which remain confidential, anticipated the support package would be finalised “well before the end of the year”.
The nation’s four refineries in Brisbane, Melbourne, Geelong and Perth – which process crude oil into refined fuels – have been hit hard since the onset of travel restrictions and stay-at-home orders to arrest the advance of COVID-19 wiped out demand for petrol and jet fuel and sent their margins crashing.
The owner of Geelong’s oil refinery, ASX-listed Viva Energy, has signalled it is hoping for certainty by December at the latest when it is due to complete a review of the 65-year-old plant’s future. The Geelong refinery has racked up $79 million of losses so far this year.
At Ampol’s Brisbane refinery, the situation is even bleaker after losses spiralled to $141 million over the same period. Ampol told investors this month it was examining options including permanently closing the plant, which employs 500 staff, and converting the site to a fuel import terminal instead.
The Australian Workers Union, representing refinery staff, urged state and federal governments to do “whatever it takes” to maintain local refining. The union’s Victorian secretary, Ben Davis, said there were more than a 1000 well-paid manufacturing jobs on the line at Viva’s Geelong refinery and Exxon’s Altona plant alone.
“Obviously they have been badly hit by the COVID pandemic, but this is an opportunity to ensure Viva and Mobil remain in the country,” Mr Davis said.
“The government’s fuel-security piece is encouraging, but they need to get on with it and deliver it reasonably quickly so the oil companies and refineries have got some certainty.”
In the past decade, three refineries have shut across Australia, increasing the nation’s reliance on imported fuels, as the local sector struggles to compete against the mega-refineries of south-east Asia with their vastly larger scale and lower operating costs.
The Morrison government’s federal budget contained a series of measures to buffer Australia against potential supply shocks caused by global events such as wars or pandemics, and to help keep refineries open “wherever commercially possible”. These included a $200 million-plus investment in a competitive grants program to develop new onshore diesel storage and increase stocks by 40 per cent.
“Our plan will create 1000 new jobs and protect workers in the fuel sector and in fuel-dependent industries like our farmers, truckers, miners and tradies,” Mr Taylor said. “It will also importantly protect motorists from higher prices at the pump.”
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