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Australia’s Refiners Receive Government Aid To Boost Fuel Security

Australia’s government will provide US$1.5 billion (AUS$2 billion) in payments to its last two refiners to ensure that they stay open until 2030 and supply the country with domestically-produced fuels, Prime Minister Scott Morrison said on Monday.

Australia will soon find itself with just two operating refineries, compared to eight operational sites 20 years ago. Due to its geographical position, Australia has lost the competition in the refining business as small and old refineries cannot rival the booming oil processing capacity in Asia, particularly China and India.

The pandemic has accelerated refinery closures globally as refiners and oil majors acknowledge that some sites have become permanently uneconomical amid depressed refining margins, fierce regional competition, and expectations of declining road fuel demand in the long term.

ExxonMobil announced earlier this year it would convert its Altona refinery into an import terminal, in the second such announcement from a supermajor in just a few months, following BP’s decision to cease production at the Kwinana refinery in Western Australia and convert it to a fuel import terminal. 

Faced with increased dependence on fuel imports, including from China, the Australian government is now “taking strong action to further boost Australia’s long-term fuel security by locking in the future of our refining sector,” it said today.

With the support to the two refineries – Ampol’s refinery in Lytton and the Viva Energy refinery in Geelong – the government looks to maintain a self-sufficient refining capability in Australia.

Related: OPEC’s Oil Exports Are Surging By 1 Million Bpd In May

Ampol, which had placed its Lytton refinery under review for potential closure, now intends to continue refining operations, thanks to the support, the refiner said following the government announcement.

“We are pleased that the governments have recognised the challenges faced by the local refining industry which includes competition from large-scale international refineries and the impacts of COVID-19,” said Matt Halliday, Managing Director and CEO.

Viva Energy also welcomed the government support, noting that it would help it to invest in the necessary upgrades to produce ultra-low sulfur gasoline, among others.

The government package support to refineries has to be approved by Parliament.

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By Tsvetana Paraskova for Oilprice.com

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