The Australian marketplace is experiencing a rapidly decreasing ability to contribute to its own fuel needs. As our refining capacity decreases, the market for importation, storage and distribution of refined crude oil products will continue to expand.
In the 2013/14 year, petroleum (oil and gas) accounted for 62% of Australia’s primary energy needs, with this figure expected to rise to 80% by 2049/50.
Over the past 13 years, Australia has increased the amount of refined crude oil products it imports from 60% to 91%. This sharp increase is arguably the result of the closure of four of Australia’s crude oil refining facilities:
- Mobil’s Port Stanvac refinery in South Australia
- Shell’s Clyde refinery in New South Wales
- Caltex’s Kurnell refinery in New South Wales and
- BP’s Bulwer refinery in Brisbane (due for closure mid 2015).
The owners of these facilities have cited an increase in input costs (while imports are simultaneously becoming cheaper) as the main reason for closure.
With these closures Australia has only four refining facilities remaining in operation, none of which are in New South Wales. If this trend continues Australia is predicted to be 100% fuel import dependent by 2030.
Recent marketplace changes
With growing demands on the import and distribution of fuel we are seeing a significant increase in the commercial transactions taking place in the sector.
Two notable additions to the marketplace are Dutch company Trafigura and Swiss company Vitol. In 2013 Trafigura’s subsidiary, Puma Energy, acquired Neumann Petroleum for approximately $200 million. Puma Energy also spent $850 million in 2013 acquiring independent fuel retailer Ausfuel, adding 110 retailers and 11 depots to its Australian portfolio.
Earlier this year Vitol purchased 870 of Shell’s Australian petrol stations, its Geelong refinery and part of its refined consumables business for $2.9 billion.
In 2012, Japanese company Idemitsu Kosan Co Ltd, also acquired 100% of Freedom Energy Holdings Pty Ltd, a significant refined oil retailer along Australia’s East Coast.
The decline in Australia’s ability to refine its own crude oil has contributed to an increase in spending on import related infrastructure. Japan’s Mitsubishi Corporation has announced plans to construct a $100 million diesel import and storage terminal at Port Bonython in South Australia which is expected to be operational by mid 2016. It is intended to be able to store 81,000 kilolitres of diesel and process 1 million kilolitres a year, servicing the growing resources sector in South Australia.
Trafigura, through Puma Energy, also finished construction and commenced operations at its new $70 million import facility near Mackay in North Queensland earlier this year. The facility is intended to service resources companies located in the Bowen Basin.
The future marketplace
With New South Wales no longer having any refining capacity and decreasing output in other Australian States, the import and distribution markets are wide open for new traders and distributors.
Further, the ability to store sufficient quantities of refined products to ensure ongoing supply will require additional infrastructure expenditure. Projects will likely include the upgrading of ageing depots and already closed refineries into bulk import and storage terminals.
Additionally, the emergence of Asian super refineries now producing high quality fuel products in close proximity to our shores, enables their surplus products to be sold in Australia at a relatively low price. The opening marketplace and lower import operational costs make this a desirable investment space for established and emerging players.
Where to from here?
Australia is already import dependent for its fuel, and with over 17 million motor vehicles and growing energy needs (including in the resources sector), the cheap, reliable and convenient supply and distribution of fuel will remain an essential and lucrative marketplace, now and well into the future.