Australia could be importing all of its transport fuel within a decade, as yet another oil refinery is set to close due to Asia’s growth.
Australia could be importing all of its transport fuel within a decade, after BP announced plans to close its Brisbane refinery, the third such closure in as many years.
The emergence of massive low-cost oil refineries in Asia has been blamed by BP Australia for its decision to close the Bulwer Island plant by mid-2015.
Just four refineries remain in operation, including BP’s Kwinana refinery in Western Australia, which BP Australasia president Andy Holmes said was not currently earmarked for closure.
However he would not commit to its future, and the ongoing viability of the remaining oil refineries – in Geelong, Altona and Brisbane – is considered in serious doubt.
Australia will supply barely one third of its own petrol and diesel and import the rest when BP’s 50-year-old Bulwer Island refinery closes.
“The biggest factor is the growth of very large refineries in Asia that presented the Bulwer operation with a huge challenge which it was not able to meet,” Mr Holmes said in Melbourne, as many of the plant’s 380 workers were given the bad news in Brisbane.
Energy analysts including Credit Suisse’s Mark Samter and State One Stockbroking’s Peter Kopetz believe the end of refining may be less than a decade away.
ExxonMobil’s Altona refinery would struggle for viability when the once abundant crude oil it sources from Bass Strait ran out, Mr Samter said.
“The industry has pretty large insurmountable challenges,” he said.
“Twenty per cent of a refinery cost is labour in Australia and in a lot of countries in Asia low to mid-single digits,” Mr Samter told AAP.
He agreed with BP that importing more fuel did not pose a threat to Australia’s energy security, or that it would push prices up for consumers and businesses.
But Mr Samter said a greater worry was Australia’s “perilously” low oil stockpiles of just 2-3 weeks’ worth, which could be tested if there was a disruption to imports.
The International Energy Agency recommend reserves of 90 days of oil.
“It needs to address its lack of a strategic reserve,” he said.
BP said on Wednesday it may convert its Bulwer Island refinery into an import terminal, similar to plans currently being implemented at Kurnell by Caltex.
But there is speculation BP will join forces with Caltex to convert the latter’s nearby Lytton refinery.
However BP did say it would not follow Shell by also selling its petrol stations, committing to expansion in the Australian downstream fuels market.