The Australian Government is taking advantage of dramatic falls in global oil prices by establishing its first Government-owned oil reserves for domestic fuel security.
Australia will also make a deal with the United States to store Australian Government owned crude oil in the United States Strategic Petroleum Reserve (SPR).
Australia has been negotiating access to the SPR since 2018, with Minister Taylor and US Energy Secretary Dan Brouillette signing the first arrangement of its kind to facilitate this deal in March this year.
Australia will spend $94 million to buy oil at the current low global prices and Australia will have access to hold oil in the US SPR for an initial period of 10 years.
At the end of February, Australia had 81 days’ worth of oil supplies, including 25 days of stocks in overseas ports and in transit to Australia. The oil held in the SPR will count towards Australia’s IEA 90 day stockpiling commitment.
Minister Taylor said these steps will improve Australia’s fuel security and the ability to withstand global shocks, such as the COVID-19 pandemic.
“The new measures will take advantage of the current low prices for oil and Australia’s privileged position of access to the SPR, which is amongst the world’s most cost-effective long-term oil storage facilities.
However, the Maritime Union of Australia has warned the Federal Government must address the nation’s reliance on foreign oil tankers.
The union is seeking a meeting with Minister Taylor to outline Australia’s reliance on foreign owned and operated tankers, which supply more than 90 per cent of the nation’s liquid fuel needs, and urge the government to address this critical vulnerability.
MUA Assistant National Secretary Ian Bray said the key concern in storing oil in the SPR is that in a crisis this reserve is on the other side of the world.
“The coronavirus pandemic has highlighted just how vulnerable global supply chains are, raising questions about how this oil could be transported to Australia during major disruptions caused by natural disasters, military conflicts, or economic crises.”
Mr Bray said securing supply chains needed to be a key component in any fuel security plan, with the complete reliance on foreign-owned shipping posing a serious threat.
“Australia needs an energy security plan that not only addresses storage and refining capacity, but also includes a strong shipping component, ensuring oil and refined fuels can continue to be reliably delivered to Australia, even in a crisis,” he said.
“Unless this vulnerability is addressed, the country will remain at risk of having our fuel supplies cut due to a future military conflict, natural disaster, economic crisis or pandemic that impacts seaborne trade.”
Improving domestic fuel security
The Government will also work with the private sector to consider options for improving domestic fuel security, and would work with refineries on temporary measures to ease the stockpiles of jet fuel.
Terms of reference to guide this process will be released in due course and will focus on investment options, supporting the refining sector and assessing the most effective stimulatory options.
To help refineries, the Government will work on a temporary change in fuel standards to provide refiners with more flexibility to adapt their operations to manage the changes in demand and oil prices as a result of COVID-19. Any change will be closely managed to ensure refiners have increased flexibility while motorists and the environment are protected.
“The temporary change provides Australian refineries with flexibility and can assist them to shore up their viability by helping them resolve some storage and supply issues,” Minister Taylor said.
The COVID-19 fuel security package includes:
- Purchasing crude oil to store in the US SPR;
- Launching a process to work with the private sector to identify options to further strengthen our domestic fuel security; and
- Working on changes to the fuel standards to provide immediate relief to refineries for the duration of the COVID-19 pandemic.