Shared from the Mon 07 May, 2018 - Sydney Morning Herald Digital Edition

Security warning as fuel reserves hit new low

EXCLUSIVE

The Turnbull government will launch a review of Australia’s fuel reserves amid national security warnings that conflict in the Middle East or the South China Sea could disrupt supply and threaten record-low domestic emergency stocks.

Environment and Energy Minister Josh Frydenberg today will announce a National Energy Security Assessment amid a backdrop of declining domestic production, diminishing refining capacity and geopolitical risks in the oil-rich regions where Australia sources the majority of its fuel.

Latest government figures show Australia has just 22 days’ supply of crude oil, 59 days of LPG, 20 days of petrol, 19 days of aviation fuel and 21 days of diesel.

Overall, the country has just 49.6 days of net coverage, which is well below the 90-day supply that Australia and other nations agreed to store under a pact with the International Energy Agency.

The most recent National Energy Security Assessment was in 2011, when Australian reserves were well above the 90-day requirement.

‘‘With the supply and demand dynamics of global energy markets changing rapidly and nearly a decade since the last National Energy Security Assessment, the time is right to relook at and rethink Australia’s fuel security,’’ Mr Frydenberg said.

The review will be completed by the end of the year and form part of a larger security assessment in 2019 that will include the gas and electricity sectors.

In an opinion piece for the Herald, Mr Frydenberg stressed that fuel was sourced from multiple countries: crude oil was imported from 21 countries and refined product from 47. No one nation provided more than 20 per cent of total petroleum imports.

‘‘In the last 10 years, three of Australia’s seven domestic refineries have closed and our domestic production of liquid fuels has declined by a third as existing fields become exhausted,’’ Mr Frydenberg said.

‘‘As a result Australia’s reliance on imported fuel has increased. On any one day, there are up to 45 oil tankers en route to Australia, with more than 20 days’ worth of supplies on board.’’

Liquid fuels account for 37 per cent of Australia’s energy use and 98 per cent of transport needs.

An IEA report in February said domestic oil production and refining capacity was declining, making Australia increasingly dependent on oil imports.

‘‘Australia is vulnerable to unexpected changes in Asian regional demand patterns and to any disruptions of the main supplies from the Middle East, on which the whole Asian region and Australia are dependent,’’ the report said.

Tensions in the South China Sea, a major shipping route, are seen as a potential threat to Australia’s fuel supplies, as is military conflict in the Persian Gulf.

Liberal senator Jim Molan, a retired army major-general, has previously warned that Australia’s armed forces could be ineffective within 19 days if stockpiles of petrol, diesel and aviation fuel were exhausted.

‘‘Does anyone think having 20 days of petrol, 21 days of diesel and 19 days of aviation jet fuel is sufficient when we almost totally depend on overseas shipping sources for our refined product? Well, I just think that is far, far too much risk,’’ Senator Molan said yesterday.

He said Australia’s fuel supply relied on vast stretches of ocean including the Persian Gulf, Indian Ocean and South China Sea.

Welcoming ‘‘the minister’s move to define this problem’’, Senator Molan credited Mr Frydenberg’s work to ‘‘move mountains’’ on the National Energy Guarantee and predicted he would do the same for fuel security.

In March this year, a Senate inquiry into the security of critical infrastructure found there were ‘‘supply chain vulnerabilities’’ in Australia’s fuel sector and ‘‘a serious requirement to assess these vulnerabilities and test the effectiveness of any existing or potential risk mitigations, particularly in scenarios of heightened geopolitical tensions’’.

The chairman of the committee, Liberal MP Andrew Hastie, last month noted 50 per cent of imported diesel and 60 per cent of jet fuel came through the South China Sea. Under any major disruption, the government could invoke for the first time little-known legislation that allows Mr Frydenberg to direct the rationing of fuel, subject to consultation with the states.

Mr Frydenberg said Australia wanted to exceed the 90-day IEA requirement by 2026.

‘‘There is no room for complacency and this review which will bring together key stakeholders will detail the steps necessary to ensure Australia continues to enjoy an affordable and reliable fuel supply,’’ he said.

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