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Australia announces subsidises for refineries

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Hydrocarbon Engineering,

Australia's government has announced plans to subsidise the country's refineries in order to keep them open wherever commercially possible, as part of a AUS$211 million plan to build new domestic fuel storage and secure Australia’s long-term fuel supply.

As part of the 2020 – 21 Budget, the Government will enhance Australia’s fuel security and bolster local industry through a AUS$211 million investment in new domestic diesel storage facilities, reforms to create a minimum onshore stockholding, and measures to support local refineries.

This will be delivered through a combined market and regulatory framework, with three key elements:

  • Investing AUS$200 million in a competitive grants programme to build an additional 780 ML of onshore diesel storage.
  • Creating a minimum stockholding obligation for key transport fuels.
  • Backing the refining sector by entering into a detailed market design process for a refinery production payment.

“Our positive changes to the fuel market will ensure Australian families and businesses can access the fuel they need, when they need it, for the lowest possible price,” the Prime Minister said.

“Fuel security underpins our entire economy. Not only does it keep Australia moving, the industry supports thousands of people across the country and this plan is also about helping keep them in work.

“Like all sectors of the economy, the COVID-19 pandemic is having an impact on Australia’s fuel industry. The events of 2020 have reminded us that we cannot be complacent. We need a sovereign fuel supply to shield us from potential shocks in the future.”

Minister for Energy and Emissions Reduction Angus Taylor said the Government recognised that Australian refineries are under significant financial pressure and is committed to working with the sector to ensure it has a long-term future.

“Almost all Australians are reliant on fuel and it is the lifeblood of so many sectors in our economy. Our farmers and miners rely heavily on diesel to do their jobs and provide services, while the transport sector sources 98% of its energy from liquid fuels,” Minister Taylor said.

“That’s why it is critical that Australia has control over its fuel security arrangements and the Government is making sure of that.”

The construction of diesel storage will not only secure diesel supplies but will support up to 950 jobs, along with 75 new ongoing jobs, many in regional areas.

A minimum stockholding obligation will act as a safety net for petrol and jet fuel stocks, and increasing diesel stockholdings by 40%.

The Government will work with industry over the next six months on the legislative and regulatory design of the package.

Refineries play an important role in securing Australia’s fuel security and putting downward pressure on fuel prices for consumers. Modelling has shown that a domestic refinery capability is worth around AUS$4.9 billion (over 10 years) in value to Australian consumers in the form of price suppression.

The Government is committed to a sovereign onshore refinery capacity despite the threat to the viability of the industry, and so is designing a market system for a production payment that recognises those fuel security benefits. It has been designed to protect Australian families and businesses from the around 1 cent per litre increase that modelling shows will hit fuel if all refineries close in Australia. For refineries to receive support, they will be required to commit to stay operating in Australia.

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