The conservative coalition government has brought forward its plans to provide financial support to the country's petroleum refining sector by starting payments from 1 January 2021, instead of the original start date of 1 July 2021. This would cost taxpayers an additional A$83.5mn ($63mn) with payments based on production from the refineries that sign up for the government funding plan.
The financial support, known as the interim refinery production payment, will be provided through a minimum A1¢ payment for each litre of gasoline, diesel, and jet fuel from the major domestic refineries who continue operations in Australia, Australian energy minister Angus Taylor said in a statement.
To receive the payment, refineries must agree to continue to operate for the duration of the programme, Taylor said. Taxpayer support is also contingent on refineries committing to an open book process and long-term self-help measures to further inform the development of the long-term package, the minister said.
The interim payment will be replaced by the longer-term financial assistance to the sector where Australian taxpayers will pay A1.15¢ a litre of refined product produced in Australia. Refiners, in return, will commit to hold minimum stocks of gasoline and jet fuel in Australia to improve fuel security. Canberra also plans to spend A$200mn to build additional diesel storage capacity across Australia, as it continues its efforts to meet its International Energy Agency strategic reserves commitments.
Australian refiner and marketer Viva Energy has welcomed the new financial support. Viva will participate in this interim programme and estimates that the new payment will contribute about A$30mn to underlying refining profit before interest, tax, depreciation and amortisation for from 1 January-30 June 2021 based on average historical refining output during calendar 2019.
Viva in September said it is considering the possibility of a full shutdown of its 128,000 b/d Geelong refinery in Victoria because of its challenging long-term outlook following the sharp fall in oil products demand, which continues to weigh on regional refining margins. Geelong is one of four refiners operating in Australia.
ExxonMobil, which operates the 90,000 b/d Altona in Victoria, is evaluating the federal government's package to provide support for the Australian refining industry.
Australian refiner and marketer Ampol, formerly Caltex Australia, has yet to respond to the new government's plan on whether to receive state aid for its 109,000 b/d Lytton refinery in Brisbane, Queensland. Ampol last month said it will complete a review of its Lytton refinery by the middle of 2021 as it considered the continuation of refining activities at the plant as well as its closure and conversion into an oil product import terminal.
BP said in October it would convert its 146,000 b/d Kwinana refinery in Western Australia to an import terminal by the middle of 2021.
