Interview with Fran Kelly, ABC Radio National Breakfast
17 May 2021
Subject: Government support for Australia's refining sector
FRAN KELLY: Australia's two remaining oil refineries will be paid up to $2.3 billion of taxpayers' money in a last ditch bid to encourage them to remain open. The fuel security payments will be handed over to Viva Energy's plant in Geelong and the AMPOL facility in Brisbane in a move to help protect more than 1200 jobs. The rescue package follows the recent closure of two of Australia's four remaining oil refineries, which left the country even more dependent on imports for jet fuels, petrol and diesel. Angus Taylor is the Minister for Energy. Minister, welcome back to Breakfast.
ANGUS TAYLOR: Thanks for having me, Fran.
FRAN KELLY: So under this announcement, AMPOL and Viva Energy are guaranteed more than $2 billion until 2030. Have they guaranteed that they'll keep their oil refineries open until then as part of this deal?
ANGUS TAYLOR: Well, they won't get access to this deal unless they commit through to 2027 and with expectation beyond that as well. That is the arrangement. But can I just pick up on something you said up front, Fran? The payments are only made if necessary. So with higher refining margins, they won't be made, with lower refining margins, they will be underwritten. The whole point here is, if we don't need to pay these, we won't. It is value for money for taxpayers in doing that, but more importantly, the jobs at stake here aren't just the 1250 people working in the refinery, they're every truckie, and tradie, and commuter, emergency service worker that's reliant on liquid fuel. If we don't have access to that liquid fuel, we have a serious problem in this country and that will be true for many years to come.
FRAN KELLY: I was going to ask about that, because the Prime Minister talked about the 1250 jobs and I did the sums, $2 billion subsidy for that many jobs works out at $1.6 million over nine years per job, per worker. So are you saying it's not as much about the jobs as it is about national security in a sense?
ANGUS TAYLOR: Well, the jobs are important, but national security is the overriding consideration here, because if we don't have access to liquid fuel, the country can't keep moving. I mean, liquid fuel keeps our economy moving and it's absolutely essential for so many parts of our lives. If we don't have access to it, we have a very, very serious problem. Now we live in a world which is far more uncertain than even a few short years ago, and so we need to make sure that we are secure against any kind of problem that might emerge. And this is equivalent to making sure that we're cyber secure as a country. This is absolutely essential to keep the economy moving, to keep people in work, to keep those essential industries going. And at the same time, the jobs in the refineries that you talked about are important, but ultimately, it's the job of most Australians that's far, far more important at the end of the day.
FRAN KELLY: People have been warning about fuel security for a while now. Is this an acknowledgement that you dropped the ball? Australia's only got about 23 days of liquid fuel stockpiles at the moment. All up, about 90 per cent of our liquid fuels are imported. And as you say, we could grind to a halt if there's overseas supply disruptions. So has the Government been too slow to this, and how much will this do to shore up fuel security?
ANGUS TAYLOR: Well, we actually have 83 days. The problem, when you-
FRAN KELLY: Onshore?
ANGUS TAYLOR: Include the crude oil and all of the fuels in the supply chain.
FRAN KELLY: [Talks over] No, but 23 days onshore? Are you talking about the supply chain that's held in the US?
ANGUS TAYLOR: The crude oil is onshore. I mean, you know, so, but ultimately-
FRAN KELLY: [Talks over] So how many days of onshore liquid fuel do we have? In the supply?
ANGUS TAYLOR: Ultimately, the way we account for it, under the IEA obligations, we have had 83 days, Fran.
FRAN KELLY: Onshore?
ANGUS TAYLOR: And that includes fuel that's approaching Australia as well.
FRAN KELLY: Right.
ANGUS TAYLOR: But it also includes crude oil, which is always excluded from the numbers and they're excluded from the numbers that you gave. But the important point here is this - we are seeing, we have seen a run down in our national capability. I mean, back in 2012 under the last Labor government, when the carbon tax came in, we lost two refineries and-
FRAN KELLY: [Interrupts] We just lost another two in under you.
ANGUS TAYLOR: And so it is essential now that we have our remaining two refineries that can then process our locally produced crude oil and in an emergency situation can keep the economy going. That's what we're doing here. Circumstances have changed over recent years. We're also in a more uncertain geopolitical environment in our region and all of those things mean that this essential for Australia, that we have the stocks we need. We've also, as part of this package, we're requiring a minimum stockholding obligation. That will increase the amount of diesel in particular by 40 per cent onshore, Fran, to your earlier question, and that will come in next year. So this is part of a package, including having extra onshore storage. We have not had enough onshore storage and we're spending $200 million alongside the private sector to get more storages in place. So the entire package will ensure that we meet our international obligations, we have the 90 days that we require and we are able to keep the economy moving in the worst possible circumstances.
FRAN KELLY: Okay. There's a couple of other elements to the package I want to get through but just first, what happens after 2030, once the subsidy ends? Hopefully by then most of us will be driving or buying electric cars, and won't that spell the end of our domestic oil refineries? How then does Australia secure the fuel supplies it needs for, you know, the defence forces, for instance, the fighter jets, the ships, the land vehicles, that kind of thing?
ANGUS TAYLOR: Defence fuel is secured in a different way, it's not through this mechanism, and defence has its own ways of securing its fuel supplies.
FRAN KELLY: Right.
ANGUS TAYLOR: But look, we're working over the next decade to make sure we've got what we need in place. There will obviously be decisions down the track. But I'd make the extra point here that this also requires a commitment from the fuel refineries to upgrade their refineries to make them compliant with lower sulfur fuels. That's good for the environment, but it also means a very significant commitment for them and puts them in a position to continue on over the longer term as well. The big barrier coming up to 2027 was to get those sulfur upgrades done. This resolves that issue and it was an important issue we needed to resolve, which will underwrite the longevity of the refineries, important for that longer term fuel security you point out.
FRAN KELLY: So an upgrade of the fuels. We have some of the dirtiest fields in the world, we've spoken about that recently here on the program. Average emissions intensity for passenger vehicles is 45 per cent higher than in Europe. You're bringing forward the industry wide review of petrol and diesel standards, too, in our cars. How soon could we see the Euro 6 standard apply here in Australia?
ANGUS TAYLOR: Well, we'll see the sulfur down at 10 parts per million, which is the Euro 6 requirement for sulfur. We'll see that going into place in 2024 as a result of this arrangement.
FRAN KELLY: So after that time, will we start importing those more economical, modern engines that we can't run here at the moment?
ANGUS TAYLOR: We're working through that issue now, but obviously the big barrier to that has been sulfur. That has been what's held us back. So we're now going back and saying, the plan was always to have that change happen in 2027. The question now is, given the sulfur upgrades have been brought forward, can we bring forward those Euro 6 standards? What's important is you will have cleaner fuel once those sulfur upgrades occur, Fran. And so the environmental benefit from that is real, it's important and the car better, it will reduce maintenance.
FRAN KELLY: We're slow to it, though. I mean why are we so far behind the rest of the world in our fuel standards? Why?
ANGUS TAYLOR: Well, Fran, the big issue has been losing refineries by imposing the sulfur requirements too early. And that's been the challenge. We've resolved that issue now. I mean, and that will allow-
FRAN KELLY: But we've been held hostage by the industry really, who didn't want to do the upgrades, is that what you're saying?
ANGUS TAYLOR: I can tell you now that what we have got in place here as a result of this package is a commitment to reduce sulfur in our fuels and improve the environmental outcomes as a result. And improve the outcomes for people driving their cars. It'll reduce maintenance costs and other things.
FRAN KELLY: Okay.
ANGUS TAYLOR: So this is a good package and it will deliver a good outcome. You have been talking about it. It is an important issue and that's why I raise it as part of the package and an important part of the package.
FRAN KELLY: Minister, another element of your portfolio, the budget didn't include anything that I could see anyway, any funding for a gas-fired power plant in the Hunter Valley. You've been talking about that as a possibility if the private sector didn't step up. There is a war chest, though, in the budget of close to $10 billion for something called decisions taken but not yet announced. Is the Government still likely to step in and build that gas-fired power plant in the Hunter Valley?
ANGUS TAYLOR: Well, Fran, we've been very clear about this. We wanted the private sector to step up. Now, we've just seen in the last couple of weeks Energy Australia commit to the Tallawarra B Power Station - 316 megawatts, a gas-fired power station with capacity for hydrogen that will be very flexible.
FRAN KELLY: Yeah.
ANGUS TAYLOR: It can complement perfectly the solar and wind coming into the system now. Now, we've set a target of 1000 megawatts. We're assessing the proposals that have come in and what we're seeing, and we'll have more to say about that.
FRAN KELLY: Well, I've heard on the grapevine, so to speak, that the Government is intending to do this. Is it off the table or on the table?
ANGUS TAYLOR: Well, grapevines say all sorts of things, Fran. Grapevines say all sorts of things.
FRAN KELLY: Well, you're the Minister. Let's hear it from the horse's mouth.
ANGUS TAYLOR: But I'm not going to make announcements on this program, on that issue now. Today is about shoring up our fuel security and making sure that we're in a position where our national security is being managed when it comes to liquid fuels, and that's the focus for today.
FRAN KELLY: Angus Taylor, thanks very much for joining us.
ANGUS TAYLOR: Good on you, Fran.