The pandemic has accelerated refinery closures globally as refiners and oil majors acknowledge that some sites have become permanently uneconomical amid depressed refining margins, fierce regional competition, and expectations of declining road fuel demand in the long term. For many countries, the closing of refining capacity means increased dependence on imports and heightened risk of fuel supply disruption in case of a major regional or world conflict.
Nowhere is this more evident now than in Australia, which will soon find itself with just two operating refineries, including one under review for potential closure, compared to eight operational sites 20 years ago.
Due to its geographical position, Australia has lost the competition in the refining business as small and old refineries cannot rival the booming oil processing capacity in Asia, particularly China and India.
Also due to its location, Australia—with reduced refining capacity—will increase its dependence on fuel imports from Asia, including from China, relations with which have deteriorated significantly over the past months, severely affecting energy trade.
Governments need to realize that the importance of refineries as strategic assets of national security has diminished since World War II, and an all-out global conflict with today’s warfare capabilities would cut not only fuel imports to oil-importing nations but also crude flows, Reuters columnist John Kemp argues. In case of a war, refineries in countries dependent on crude imports would be worth nothing if blockades of shipments and shipping lanes cut off crude flows to feed those refineries, Kemp says.
This may be true in case of a global armed conflict, but Australia, due to its proximity to China, is thinking about its national security even when a refinery with a processing capacity of just 90,000 barrels per day (bpd) closes.
This will happen when ExxonMobil converts its Altona refinery into an import terminal. The refinery is no longer considered economically viable, the U.S. corporation said this week, in the second such announcement from a supermajor in just a few months, following BP’s decision to cease production at the Kwinana refinery in Western Australia and convert it to a fuel import terminal.
The U.S.-China trade war and the Australia-China geopolitical and trade spat of recent months, as well as the heightened uncertainty on global energy markets in the pandemic, is exacerbating the national security challenge for Australia.
The country will have two more import terminals and two fewer refineries, which will inevitably raise its import dependence.
The refinery closures also highlight the wobbling energy strategy of Australia’s government, which has yet to draft a comprehensive plan how to adapt the world’s top coal exporter to the challenges posed by climate change, according to Reuters columnist…
Go to the news source: Australia Is Growing Dangerously Dependent On Foreign Fuel