(Bloomberg) -- Australia will invest A$211 million ($154 million) in new diesel storage facilities and introduce other measures aimed at shoring up the nation's struggling refining industry and bolstering domestic fuel security.
A$200 million will be used to create an additional 780 megaliters (4.9 million barrels) of onshore diesel storage space, Angus Taylor, the country's minister for energy and emissions reduction, said in a statement Monday. The government will also start work to introduce a refinery production payment and create a minimum stockholding requirement for key fuels.
Top refining companies Viva Energy Group Ltd. and Ampol Ltd. have put their facilities on review for potential closure as the coronavirus pandemic slashed fuel demand at a time when they were already struggling to stay competitive. That has put pressure on Prime Minister Scott Morrison's government to offer the industry support to safeguard fuel security.
“It is critical that Australia has control over its fuel security arrangements,” Taylor said. “Almost all Australians are reliant on fuel and it is the lifeblood of so many sectors in our economy.”
As Australia's emergency fuel reserves have lagged behind its international commitments for several years, the government reached a deal in April to keep oil in the U.S. Strategic Petroleum Reserve. While that will count toward the country's obligation to hold 90 days worth of net imports as required by the International Energy Agency, critics say it's too far away to improve domestic fuel security.
The government also plans to introduce key transport fuel reserve requirements for the first time. Gasoline and jet fuel storage will be mandated at around 24 days of consumption. Diesel stocks must be increased by 40% to 28 days in reserve.
Ampol welcomed the announcement, but said it needed to see more detail to better understand the overall impact on its business. The company took an A$80 million impairment on its only refinery in the first half and extended a turnaround at the facility after demand weakened due to Covid-19 restrictions.
“Global and domestic conditions for refining remain uncertain and extremely challenged,” an Ampol spokesman said by email. “While we are currently focused on the restart of operations at Lytton, we will continue to review our refining operations.”
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