Australasia: a trimmed down downstream

Eleven countries are in the Commonwealth: Australia, Fiji, Kiribati, Nauru, New Zealand, PNG, Samoa, the Solomon Islands, Tonga, Tuvalu, and Vanuatu. Tokelau is a New Zealand Dependency, and Niue and the Cook Islands are sovereign states in free association with New Zealand. The Australian External Territories include Christmas Island, Norfolk Island, and the Cocos (Keeling) Islands. Nauru and PNG, now independent, were once part of the Australian External Territories.

These countries and dozens more cooperate in regional trade agreements including the Pacific Island Countries Trade Agreement (PICTA), the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA), and the Pacific Closer Economic Relations Plus Agreement (PACER Plus). Migration patterns create even stronger ties. For example, the census of 2021 counted the Cook Islands population at 14 987. However, approximately 80 000 people in New Zealand identified themselves as Cook Islanders or of Cook Islands descent, and approximately 28 000 in Australia did the same.

These myriad ties help explain the importance of what may appear to be minuscule volumes of petroleum fuel shipped from Australia and New Zealand across hundreds or even thousands of miles to small markets in the Pacific and Indian Oceans. A voyage from Geelong in Australia, the site of the Vitol Viva refinery, to Fiji is over 2200 nautical miles. A voyage from Geelong to the Cocos Islands is 3184 nautical miles. Yet LPG and other fuels were faithfully delivered to these and other far-flung islands for many years – until recently.

Australia, New Zealand, and to a lesser extent PNG, have been the focal points of Australasia’s downstream petroleum industry. These countries were the only ones with a refining presence, and their ties to other island countries motivated them to develop and maintain trade links. This article discusses the wholesale retreat of Australasia’s refining sector, the partial recovery in oil product demand, and the dramatic impacts on oil product trade.

Australasia’s retreat from refining

Australia is the key refining country in Australasia. It has a long history as a refining centre, but as time has passed, the facilities and technology-in-place have grown outmoded. The industry was characterised by medium-sized plants with gasoline-oriented upgrading. When Asia-Pacific oil demand (dominated by diesel) surged, larger and more sophisticated refineries were built in countries including South Korea, Taiwan, Thailand, India, and China. Australian refineries began to lose their competitiveness. For a time, refineries remained viable by virtue of their access to domestic crude and feedstock supplies and their storage, transport, and retail infrastructure in local population centres. However, crude production from many of the older, established oilfields began to decline, and Australian refineries began to rely more on imported crude oil. Importing crude oil from the Middle East and then trying to export refined products into the Asia-Pacific market created exceedingly difficult economics.

This article was originally published in the February 2024 issue of Hydrocarbon Engineering magazine. To read the full article, sign in or register for a free subscription.

Written by Nancy Yamaguchi.

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/07022024/australasia-a-trimmed-down-downstream/