Refinery’s $1bn lifeline
THE struggling Geelong refinery will be able to access a billion-dollar lifeline over the next nine years.
Viva Energy will split up to $2.047bn with Ampol under a federal government variable pricing mechanism that will lock down the futures of Australia’s last two refineries.
Under the complex package, to be unveiled on Monday, more support will flow when refining margins are low, and less when they are high.
The package also includes up to $302m for major refinery infrastructure upgrades to help
refiners bring forward the production of better-quality fuels from 2027 to 2024.
The Geelong refinery, which employs about 700 people, cost Viva Enery almost $100m last year as the pandemic played havoc with worldwide oil and travel markets.
Scott Morrison said the government was delivering on its commitment to maintain a self-sufficient refining capability in Australia by supporting the operation of the Ampol refinery in Lytton, Queensland, and Geelong’s Viva Energy refinery.
“This is a key plank of our plan to secure Australia’s recovery from the pandemic, and to prepare against any future crises,” the Prime Minister said.
“Shoring up our fuel security means protecting 1250 jobs, giving certainty to key industries, and bolstering our national security.
“Earlier investment in our Australia’s ability to produce better quality fuels, including ultra-low sulphur levels, will also improve air quality and deliver an estimated $1bn in lower health costs.
“Major industries like agriculture, transport and mining, as well as mum and dad motorists, will have more certainty and can look forward to vehicle maintenance savings and greater choice of new vehicle models.”
The variable Fuel Security Service Payment (FSSP) has been costed at up to $2.047bn to 2030 in a worst-case scenario that assumes both refineries are paid at the highest rate over the entire period,
The government expects actual payments to be less than this, as payments are linked to refining margins at the time and to actual production of key transport fuels.
Payments will be made between the following ranges, limiting the downside risk for refineries:
0 CENTS per litre when the margin marker hits $10.20 a barrel; and,
A MAXIMUM of 1.8 cents per litre when the marker drops to $7.30 a barrel. For the first quarter this year, the Geelong refining margin was US$5.90, or A$7.58.
The federal government has allocated $50.7m for the implementation and monitoring of the FSSP and the minimum stockholding obligation, ensuring industry complied with the new fuel security framework.
The government also flagged it would work with the energy companies on their plans to consider future fuel technologies, including the refineries’ roles in the rollout of future fuels, such as electric vehicle charging and hydrogen transport infrastructure.