Australia approves refinery subsidies for Viva Energy and Ampol

The Australian Parliament has passed the Fuel Security Bill 2021, granting nearly $1.8bn (A$2.3bn) in subsidies to help maintain operations at the country’s struggling oil refineries.

Effective from 1 July 2021, the package will be utilised by Viva Energy and Ampol to keep the country’s last two remaining oil refineries open until 30 June 2027.

The reforms include a minimum stockholding obligation (MSO) for gasoline, diesel, and jet fuel.

The MSO, which is effective from July 2022, aims to safeguard key transport fuel stocks at a baseline level.

The reforms also offer fuel security services payment (FSSP) to help refiners during loss-making periods.

The funding is expected to help retain 1,250 jobs at the two refineries and create another 1,750 construction jobs.

According to a Reuters report last month, the government also agreed to provide Ampol and Viva with up to $94.5m (A$125m) each to upgrade their refineries to produce ultra-low sulphur petrol by end-2024.

Viva Energy operates Geelong Refinery, which began operations in 1954. It supplies 10% of the country’s fuel.

With a capacity of up to 120,000 barrels of oil per day, the refinery produces petrol, diesel, LPG, jet fuel, avgas, bitumen, specialty solvents for a wide range of industries, and Low Aromatic Fuel.

Ampol owns and operates the Lytton oil refinery, located in the Brisbane suburb of Lytton in Queensland. It is capable of processing 6.5 billion litres of crude oil per year.

Australian Energy Minister Angus Taylor said: “The government is also providing support for major refinery infrastructure upgrades to help refiners bring forward the production of better-quality fuels from 2027 to 2024.

“Enhancing Australia’s fuel security is a key plank in our plan to secure our recovery from the Covid-19 pandemic and to prepare against any future crises.”

The latest development comes after BP decided to convert its Kwinana Refinery in Western Australia to an import terminal, citing lack of economic viability.

In February this year, ExxonMobil too announced plans to shutter the Altona refinery in Victoria and convert it to an import terminal, citing similar reasons.