Scott Morrison’s five-year blueprint for energy security lifeline

Long-term fuel supplies will increase and refineries handed a lifeline under an economic blueprint to protect the industry.

Alcoa employee Rebecca Hudson at the Wagerup Refinery. Picture: Colin Murty

Australia’s long-term fuel supplies will be greatly increased and the nation’s refineries handed a lifeline under Scott Morrison’s five-year economic blueprint to protect jobs and industries by ­delivering cheaper and more ­reliable energy.

The Prime Minister will make the first in a series of energy security announcements on Monday ahead of the October 6 budget that will set out the government’s strategies on fuel security, energy reliability and affordability and support for a gas-led COVID-19 recovery.

Prime Minister Scott Morrison. Picture: PMO

Mr Morrison said the government would commit $211m in the budget to support the building of an extra 780 megalitres of onshore diesel storage and build a “sovereign fuel supply to shield us from potential shocks in the ­future”.

The grants would be matched by state governments or industry.  The government will also ­establish obligation measures to increase key transport fuel capacity, including growing diesel stocks by 40 per cent, and implement a new production payment to ensure Australians avoided being slugged 1c a litre under a scenario where all refineries were forced to shut.

Government modelling shows that maintaining a domestic refinery capability was worth $4.9bn over 10 years in driving down fuel prices for Australian consumers.

Mr Morrison said the government’s fuel market reforms would “ensure Australian families and businesses can access the fuel they need, when they need it, for the lowest possible price”.

“Fuel security underpins our entire economy. Not only does it keep Australia moving, the industry supports thousands of people across the country and this plan is also about helping keep them in work,” he said. “Like all sectors of the economy, the COVID-19 pandemic is having an impact on Australia’s fuel industry. The events of 2020 have reminded us that we cannot be complacent.”

Energy Minister Angus Taylor during a visit to Lobs Hole in the Snowy Mountains. Picture: Gary Ramage

Energy Minister Angus Taylor, who is expected to release the government’s final technology investment roadmap this month, said the construction of new diesel storage would support almost 1000 jobs, including in strategic regional locations.

He said the government was acting to support Australian refineries that had come under significant “financial pressure”.

“Almost all Australians are reliant on fuel and it is the lifeblood of so many sectors in our economy. Our farmers and miners rely heavily on diesel to do their jobs and provide services, while the transport sector sources 98 per cent of its energy from liquid fuels,” Mr Taylor said.

The October budget will focus on delivering a blueprint for providing long-term cheap and reliable energy and fuel supplies to support investment and job creation across the manufacturing, mining, agriculture, transport and construction sectors.

Australia has historically failed to uphold its 90-day fuel stockholding obligation as a member of the International Energy Agency. At the end of July, Australia’s fuel stockholding was at 84 days, including stocks on water.

The $211m fuel security package will bankroll the construction of storage tanks across the nation from next year, in partnership with the private sector and state governments. Increasing diesel stocks is critical to enhancing Australia’s resilience to global supply disruptions and providing fuel security for emergency services, back-up electricity generation, mining, agriculture and distribution of foods and medicines.

Mr Taylor will work with industry on a legislative package to create a minimum stockholding obligation to ensure a baseline level of key transport fuels is kept onshore as a buffer against supply shocks.

The obligation requiring industry to maintain a specific level of fuel stocks for the first time will aim to increase diesel stocks by eight days to 28 and increase petrol and jet fuel stock levels to 24 consumption days.

Refineries would be exempt from industry obligations to hold additional stocks.

The move to protect refineries is headlined by a market-based system ensuring a minimum value of 1.15c per litre to refineries, based on their fuel security contribution. To receive support, refineries will be required to commit to stay in Australia and oversee internal efficiency measures.