Then there were three. Another Aussie oil refinery dies

Down to three from seven over a decade. Via Yahoo:

BP Plc will cease fuel production at its 65-year-old Kwinana refinery in Western Australia, citing low margins and tough competition from Asia, and will transition the facility into an import terminal.

The U.K. company’s move will leave Australia with just three remaining refineries, with the future of those also in doubt after the demand destruction caused by Covid-19 hit an industry already struggling to stay profitable. The government in September announced a package of measures to support the refiners, including a potential production payment to recognize their strategic role in supporting the nation’s fuel security.

“The continued growth of large-scale, export-oriented refineries throughout Asia and the Middle East has structurally changed the Australian market,” said BP’s Australia country head Frédéric Baudry in a media statement. “Regional oversupply and sustained low refining margins mean the Kwinana refinery is no longer economically viable.”

Previously from Domain:

For many Australians the Federal government’s plans to spend $211 million building some very large fuel tanks, and on subsidies for local oil refineries, will mean very little. It sounds like just one more infrastructure building, job creating, project being rolled out as part of the post-COVID-19 recovery plan.

On the other hand another, much smaller, group of leaders in defence and fuel dependent sectors and industries will be very happy indeed. That is because a long term deficiency in Australia’s preparations for catastrophes such as international terrorism and even the outbreak of war, is being addressed.

The $211 million spend, to be formalised in the forthcoming budget, will begin moving this country towards compliance with its international fuel security obligations, as set out by the International Energy Agency, for the first time in many years.

And this:

The town of Winnie in Texas, close to the border with Louisiana, is a very long way from Australia – more than 8000 kilometres as the crow flies.

It’s an unremarkable place. Two freeways bisect its main street – itself a four-lane highway – that is lined with a branch of Texas First Bank, iconic diner Dairy Queen and a scattering of car dealerships, liquor stores and churches.

Yet, quite suddenly, Winnie has become central to Australia’s security and resilience in the face of a future crisis.

It’s not the town itself. But a few miles to the south east, in an area known as Big Hill, where the vast Texan flatlands become pockmarked with clearings.

These are entrances to a huge underground network of storage tanks that can hold up to millions of barrels of oil to be used in times of dire need.

It’s one of several sites that make up the US’s Strategic Petroleum Reserve (SPR), designed so the country doesn’t run out of fuel should the unexpected happen. And in the past few months the Australian Government has scooped up almost $100 million of that fuel to “boost the nation’s long-term fuel security”.

Why worry? From ASPI:

The federal government has largely left energy security to be determined by the self-interest of industry bodies and has been happily convinced by the arguments of economic liberals who—conveniently leaving aside the oil crises of the 1970s—claim that we haven’t had any supply problems, so we won’t have any in the future.

More recently, analysts have tried to simultaneously square the exigencies of energy security with those of climate change, generally advocating solutions such as electric vehicles, which don’t address the risks in today’s hydrocarbon economy as much as urge its replacement.

But the maritime security environment has changed. Australia’s key trading lanes cross an increasingly contested Indo-Pacific—sea lanes we must defend with a petrochemically powered navy. China has given sustained and serious attention to the risks associated with its seaborne oil imports, particularly the chokepoint at the Strait of Malacca. It is easy to imagine China wishing to turn its ‘Malacca dilemma’ into a dilemma for everyone else.

And Air Vice-Marshal John Blackburn AO:

The people of Australia expect the Defence Force and the nation’s critical infrastructure to operate not just when the markets are functioning normally, but when there is a problem. There are are significant issues with our energy systems that should concern us all; unfortunately, the analysis of our energy security and resilience is inadequate and the management of energy security has been outsourced to the market. The idea that we are at peace and “business as usual” is the appropriate model where the markets can manage all aspects of our critical infrastructure and supply chains is clearly out of date.

Energy security is a vital component of national security and an increased level of Government control / leadership with respect to energy security is warranted. A 5th Generation Defence Force needs a 5th Generation energy system; so does our Nation. The discussion of these issues is not just for our politicians; it is our collective responsibility to discuss these issues and to tell our politicians what we need to have done and not wait to just complain after our energy systems fail.

Ah yes, Scotty from Marketing. Tough on borders and national security.

At least for the thirty days that it takes for us to run out of oil when blockaded by an unfriendly power.

David Llewellyn-Smith
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Comments

  1. So Western Australia will now be reliant on fuel imports via sea tanker from Singapore and China like Sydney and Darwin.
    That Kwinana refinery might just have survived if the clever people in Canberra had made it conditional to iron ore miners where the diesel excise exemption only applies to diesel sourced from Australian refineries like the Kwinana refinery and if they decide to import diesel out of Singapore the diesel excise exemption does not apply.
    Amazing how many billions have been thrown into defence infrastructure in the West and Northern Territory, the Achilles heel is the reliance of fuel supply from Singapore. Impossible to run a fuel train from Victoria to Sydney, Perth or Darwin, fuel haulage by rail ceased well over 20yrs ago and all the rail loading infrastructure has been ripped up and rail tankers scrapped. When may explain why the Americans although visiting annually in the dry season for training have never established a permanent presence in Darwin, despite best efforts from Canberra

    • I could be wrong, but I think that Kwinana refinery already relied on 100% imported crude from Asia? It won’t really make much difference to fuel security, if that’s the case.

        • rob barrattMEMBER

          I can just see it now:
          Conflict with China. Convoys of slow, laden tankers heading for Perth, escorted by you beaut submarines that run out of diesel half way…
          Remember the state France was in before Hitler’s WW2 invasion? We make that France look like vorsprung durch technik

  2. Should have had a strategic reserve built years ago as well as a couple of nuclear plants but alas.

    IMO the fuel situation is the epitome of our cultural attitude – let someone else take responsibility for it. In this case it’s the US again.

    • Yes, it really os shocking and it is completely bipartisan in nature too. The lack of energy security has been an identified policy problem for at least 20 years now.

  3. When Australia face a blockade, ScoMo will fly straight to the US. That’s why it makes sense for our strategic stockpile to be located there.

    On a more serious note : blockade is on the far end of the spectrum in terms of risk. Unrest in the Straits of Malacca leading to fuel tankers being hijacked will be a much bigger threat. Anyone still remember Somalia and how many tankers got hijacked?

  4. If by blockade you mean naval blockade, it wouldn’t even require that considering the amount of fuel that comes via Singapore. I doubt the Singaporean’s would argue if the Chinese told them to find reasons to restrict exports to here (refinery breakdown etc).

    We’re a backwater, we really are. Horne was wrong; we’re not lead by 2nd rate politicians, that’s way to generous!

  5. GunnamattaMEMBER

    Just to add to the outlook – from about 7 weeks ago…..

    Geelong refinery ‘doomed without handout’
    https://www.afr.com/companies/energy/geelong-refinery-doomed-without-govt-aid-20200907-p55szo

    The threatened shutdown of Geelong oil refinery would mean a critical loss of fuel security for the country and trigger a domino-style collapse of Victorian manufacturing, said Viva Energy chief executive Scott Wyatt, advising that only a government support package can now save the loss-making plant.

    Mr Wyatt said the shutdown of one of Australia’s four remaining oil refineries, which have all been hit by fallout from the COVID-19 pandemic, would have serious implications, both nationally and for the state.

    “This is not just a national crisis, it’s a state crisis that needs to be addressed,” he told The Australian Financial Review. after Viva flagged a possible shutdown of the 120,000 barrels-a-day plant due to “extreme pressures” on refining worsened by Victoria’s lockdown restrictions.

    The federal government is already considering aid measures for the plant, which supports 700 jobs. But Mr Wyatt said action was also needed from the Victorian government, which has been slow to address shipping and energy cost disadvantages that left the Geelong plant uncompetitive even against domestic peers.

    Australia already imports more than half its petrol and diesel needs, part of the reason behind Canberra’s strategic storage plan, where all four refineries are vying for contracts with the government to build and manage oil and fuels storage plants.

    “In a world where sovereign security and energy security has been brought into sharp focus by the impacts of COVID-19, retaining that refining capacity is absolutely critical for the country,” Mr Wyatt said.

    But within Victoria, a closure of Geelong would put at risk other manufacturing and chemical plants, he argued, risking the elimination of a whole sector just as happened with the car industry.

    “It needs to be understood that Geelong, Altona, LyondellBasell, Qenos – this is a whole ecosystem of plants that indirectly support each other, and you pull one component of that apart and you risk the whole thing falling apart,” he said.

    Constraints in the shipping channel to Geelong costs Viva $20 million a year, while the state has the highest electricity and gas costs in the country, increasing the plant’s energy costs by $20 million-$30 million over the last few years, Mr Wyatt estimated.

    “I am disappointed with the speed at which they are moving, and unfortunately time is not on our side,” Mr Wyatt said of the Victorian government’s response, adding that the federal government was reacting more speedily with its review of the sector.

    I know a few people out at the refinery and word from them is that they are expecting a closure announcement any day…..

    Note the points in the AFR piece about energy costs.

    • The writing has been on the wall for a long time for the Geelong refinery hasn’t it Gunna? From what I have heard safety standards have considerably dropped since Viva took over. just trying to squeeze the last few drops out…

  6. Yeah nah. Top secret, but the RAAF is fitting B-52s to drop $5 million Chatswood houses and $1 million 1-bed apartments onto our invaders. Deep down, its known the Chinamen can’t resist them and their attack will just descend into an auction frenzy. You’ll see.

  7. Display NameMEMBER

    I am sure Angus ia organising strategic refining capacity for Australia,….based in Burkina Faso ?

  8. Ye all of little faith. Who needs fossil fuels? Obviously, Aussie Net Zero Emissions will fix all this, by 2050.

  9. Pauly 📡MEMBER

    I just bought a diesel hilux, figured I would need my own strategic reserve of fuel in the future because we can’t rely on government to have any foresight. How utterly inept do you have to be to have a strategic fuel reserve based so far away from where its potentially needed.

  10. I am sure those brand new submarines are going to run on thoughts and prayers, because sure as hell we won’t make the fuel to keep them from raising to the surface and be paddled into port.

    • Heh, how’s this for dystopia – we’d be the most covid free place in the world, and sort out the emissions/capita problem because we won’t have the fuel to drive anywhere. Next – toll road companies will start trolling for foot-traffic…

    • Well – You can’t make a molotov cocktail if you don’t have the main ingredient… Who’s thinking ahead now?

  11. TheLambKingMEMBER

    As much as we should have very aggressive policies to convert to EVs, we will need oil refineries for a while. Oil refineries are one of the most electricity intensive business around.

    High power intensive industries are perfect ‘reverse batteries.’ Instead of giving these industries cash subsidies, we instead build big enough solar & wind farms to power the factory and then temper the demand from the factory based on the external demand. So during the day, the oil refineries get (almost) zero cost power – which is their biggest cost. On days of high power days we make those factories cut power and we then pump the extra power back into the grid.

    So we build ‘spare capacity’ power for the grid, that as a by-product helps keep people employed and boosts our defense position.

  12. Australia is almost now completely deindustrialised. We are utterly vulnerable to the whims of China and the Climate change hysteria is also accelerating our downfall.

  13. Personally it’s not the loss of the Refinery itself that worries me anywhere near as much as the loss of Industrial skills.
    Lets just think of a few human skills needed to run a Refinery
    Well there’s lots of pipes welded to a high standard designed to survive high pressure, high temp, corrosive fluids and possibly explosive environments
    There are Chemical Engineers employed to adapt the process and optimize the end product for a given type of Crude oil supplied
    There are Industrial / Control Systems Engineers that ensure every aspect of the Plant works together in a continuous production flow
    There are lost of skilled mechanics and machinists
    There are doubtlessly a plethora of safety and fire suppressant systems experts
    There are lots of trades people involved in scheduling and running of the plant
    there are plenty of Tradies involved in ongoing maintenance

    Too be honest I’m just making this up as I go along because this is an area where I have zero expertise, but I am glad that there are Australians who clearly understand how to do Petroleum Refining and I’d very much like to keep these people and these skills in Australia.
    BTW having a plant on your soil that you don’t really know how to design, maintain or run is another undeniable sign that we are quickly morphing into a Banana republic.

  14. bolstroodMEMBER

    By accelerating our uptake of EV and renewable energy we free up more of our dwindling liquid fossil fuels for essential services and the military.
    Sure it won’t happen over night but we could start making steps to be energy self sufficient, our government keeps telling us that National Security trumps all else.