Australia's last refineries are vital, says Ampol boss amid fuel crisis

The head of Australia's largest fuel supplier, Ampol, has emphasized the critical need for the nation to maintain its domestic refining capacity in the wake of global fuel supply disruptions. Matthew Halliday, Ampol's CEO, told the That's Business podcast that the conflict in Iran and subsequent fuel crisis have starkly illustrated how quickly international oil market turmoil can impact the Australian economy.

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It highlights the criticality and the strategic nature of refining in Australia, and does highlight the need for national fuel reserves.

"It highlights the criticality and the strategic nature of refining in Australia, and does highlight the need for national fuel reserves," Halliday said. He noted that severe fuel shortages can rapidly affect the entire economy. This comes as the federal government has introduced a $10 billion package aimed at bolstering fuel and fertilizer security, including establishing a significant fuel reserve and increasing minimum stockholding obligations.

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If you do run very tight on fuel, it does effectively flow its way right through the economy relatively quickly.

Halliday pointed to a concerning decline in Australia's domestic refining capabilities, with five refineries closing since 2013, leaving only two operational. This reduction has led to diminished inventory coverage. He stressed the importance of local fuel sources, particularly when global markets are unstable. "Whilst there were some really tight points in terms of refined product supply, we could always secure crude for the refineries, including increasingly out of the United States," he stated.

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Since 2013, five refineries have closed, and we've only got two left.

The two remaining refineries, Ampol's Lytton facility in Brisbane and Viva Energy's Geelong refinery, collectively supply about 20% of Australia's fuel. The government's Fuel Security Service Payment, extended until 2030, has been crucial for their operation during periods of high production costs. Halliday acknowledged that without this support, the Lytton refinery, which processes 110,000 barrels daily and has undergone significant investment, would face extreme challenges competing against much larger, modern refineries abroad. Ampol is now in discussions with the government regarding substantial long-term investment for the Lytton refinery.

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That has, as a consequence, led to less days' coverage in terms of inventory.