The government has announced a new fuel security package that it says will provide up to $2.4 billion to support local refineries and secure Australia’s sovereign fuel stocks.
The package includes a variable Fuel Security Service Payment (FSSP) to the Ampol refinery in Lytton and the Viva Energy refinery in Geelong. The FSSP has been costed up to $2.047 billion to 2030 in a ‘worst-case scenario’, Prime Minister Scott Morrison and energy minister Angus Taylor said on Monday.
“This figure assumes that both refineries are paid at the highest rate over the entire nine years in COVID-19-like economic conditions, which is unlikely as the economy recovers,” they said in a statement.
“Actual payments are expected to be less than this, as payments are linked to refining margins at the time and to actual production of key transport fuels.”
The government will pay refineries a maximum of 1.8 cents per litre when the margin marker drops to $7.30 per barrel of oil. However, refineries won’t receive government support when they are performing well. They will receive 0 cents per litre when the marker hits $10.20 per barrel.
Morrison said the support to Ampol and Viva Energy would protect the jobs of 1,250 workers, create 1,750 construction jobs, and would prevent high fuel prices.
“This is a key plank of our plan to secure Australia’s recovery from the pandemic, and to prepare against any future crises,” he said in a statement.
“Major industries like agriculture, transport and mining, as well as mum and dad motorists, will have more certainty and can look forward to vehicle maintenance savings and greater choice of new vehicle models.”
The package has also allocated up to $302 million for refinery infrastructure upgrades that will help refiners bring forward the production of better-quality fuels from 2027 to 2024, and $50.7 million for the implementation and monitoring of the FSSP and the minimum stockholding obligation.
Morrison and Taylor said the government would work with the refineries to speed up fuel quality improvements by co-investing with domestic refiners to undertake infrastructure upgrades for low sulfur fuel production.
They said the government would also:
- Work with both refineries on their plans to consider future fuel technologies and other development opportunities,
- Accelerate the industry-wide review of the petrol and diesel standard to 2021 — including a consideration of aromatics levels — to create a Euro-6 equivalent petrol and diesel standard that is appropriate for Australia,
- Introduce the Fuel Security Bill to Parliament to ensure the FSSP can begin on July 1, and to set the key parameters for the minimum stockholding obligation that will commence next year.
Taylor told reporters that, in the event of a crisis, Australia currently has 83 days worth of fuel stocked up. The package aims to extend that to more than 90 days, he said.