Fuel Security (Consequential and Transitional Provisions) Bill 2021

By Matt Keogh MP

15 June 2021

Watch Matt's speech here

Back in 2011, Australia had a liquefied fuel reserve well over the 90-day International Energy Agency requirements, but, over the last 10 years, Australia's seven fuel refineries have dwindled down to just two. Three years ago, with Australia's reliance on imported fuels increasing and about 45 tankers on their way to Australia every day, the Turnbull government announced that it would start meeting its IEA obligations through stockholding agreements with foreign entities—for example, that fuel being available offshore. Concern was felt by many in this parliament that this approach was leaving Australia vulnerable to supply chain shocks. COVID-19 has demonstrated that such supply chain disruptions are not just a theoretical possibility.

Unfortunately, the solution offered up by the Morrison government was to acquire fuel reserves stored in the United States. In September last year, the Prime Minister and his energy minister, Angus Taylor, announced that they would design a system for a production payment that would recognise fuel security benefits, improve our sovereign onshore refinery capability and secure the viability of that industry. Of course, this followed because, after the United States solution, Australians were concerned that that would be entirely ineffective. To quote him directly, the Prime Minister said:

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.

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. We need a sovereign fuel supply to shield us from potential shocks in the future.

I couldn't agree more, but the government's proposal was already being criticised as too little too late. With an announcement by BP Kwinana, Australia's largest refinery, that it was due to close shortly thereafter, it was quite literally too little too late. It was all photo-op, no follow-up—in fact, it didn't even get there in the first place.

This isn't a new issue. Menzies identified the importance of sovereign fuel supply all the way back in 1949. He said:

In truth, petrol is vital to Australian production and transport. Having regard to our vast area, distances and needs, it is more important here than in most other countries of the world.

The recent announcement from this government in relation to the legislation before us today, the Fuel Security Bill 2021, means that Australia will be able to retain the capacity to produce its own fuel, which is absolutely critical for our national security. We've only got two refineries left. It's not even close to being satisfactory. The closure of refineries has had a huge impact on local economies, our national economy, national security and our way of life. The funding in this legislation seeks to maintain our remaining two refineries until at least 2027. While welcome, it will not combat the issue completely.

In May this year, following an announcement for additional support for fuel refineries, the Australian Workers Union released a statement:

It's extremely disappointing to see so many refineries close in the past decade—including BP Kwinana, and ExxonMobil in Altona, in just the past 9 months.

They went on to clarify that, yes, indeed, if the government had acted sooner, these closures could have been avoided. Dan Walton, the national secretary of the AWU, said:

Importantly for the national interest, the ongoing viability of our refineries mean the skills of highly specialised technicians will be preserved—skills that will be needed—

moving forward in our energy mix. He went on:

Being able to make our own fuel is a critical sovereign capability. Without it, our national and economic security are completely at the mercy of trade routes that are threatened by potential international conflict or—

as is now all too familiar to us all—

pandemics.

We've already seen supply chain disruptions through COVID-19 and vaccine nationalism. There is no doubt that, if push comes to shove, other nations will restrict fuel exports to us if they need that fuel. But it's not just about supply, it's not just about jobs, it's not just about the economy, but it's about our national security, our sovereign integrity and our ability to look after ourselves.

Retired Air Vice-Marshal John Blackburn AO has been very vocal on this matter, criticising Australia's approach to ensuring national liquid fuel security. I tend to agree with him. It seems the member for Canning, now the Assistant Minister for Defence, agrees too. In 2018, when he was the Chair of the Parliamentary Joint Committee on Intelligence and Security, the member for Canning told The Australian that 50 per cent of our imported diesel and 60 per cent of our jet fuel comes through the South China Sea. He said, 'That leaves Australia very vulnerable to coercion through a disruption of our liquid fuel supply'. That same year, the member for Canning said, 'You can have the best military in the world but it's futile if you can't fuel it'. The member for Canning and I disagree on many things, but we completely agree on this.

The COVID-19 pandemic has exposed significant vulnerabilities in global supply chains. Importing more than 90 per cent of our fuel stocks means we are absolutely at the mercy of overseas supply interruptions. Our oil refineries, of which we have only two left, both in the eastern states, are very much being kept on life support. We need to think about what happens next. What happens after the 2027 guarantee? The warning signs have been there for years, but it seems we are either complacent or in denial or both. We need to approach this not just from an economic perspective but also from a scientific, a business continuity and, perhaps most vitally, a military defence approach. We cannot forget that fuel access and supply is a fundamental defence industry input to defence capability.

In recent years, this government has admitted imports are cheaper than maintaining the refining industry. But can you really put a price on our sovereign integrity? Many of the fundamental assumptions about our nation's security need to be revisited, and, with that, the assumptions that we have made regarding our supply chains and, in particular, fuel supply. The security of critical supply chains is something that can't simply be left to the market or big business. The government needs to take a leading role to ensure our nation's ongoing security. We need to ensure that we have a defence strategy and a plan to have adequate fuel security to ensure that, whatever the next crisis we encounter is, we are ready for it.

The closure of all bar two fuel refineries will leave the nation more vulnerable to a global crisis. We must safeguard our nation's liquid fuel security. The announcement earlier this year that will ensure two refineries can stay open in Australia is welcome, but, really, it only just scratches the surface. Basically, everything that moves in this country is fuelled on diesel or avgas. The WA resources industry—the one that keeps our entire nation's economy going—would literally stop without these fuels. Yet now, without the BP Kwinana Refinery, there are only five days of avgas storage in Western Australia and about three weeks of diesel. Reliant on imports, many of which traverse northern Asia, we are now without an option for refining our own from more abundant crude imports from around the globe. Remember, you cannot truck these fuels across the Nullarbor. We can have the best weapons, missiles, tanks and technology, but, if we've got no fuel to run these things, we're just providing really expensive target practice to our enemies.

Australian Strategic Policy Institute's executive director, Peter Jennings, said recently that Australia is closer to being utterly dependent on imported fuel. Surely, if we have learnt anything in the last year, it's that overdependence on just one-time supply is a massive strategic risk. In September last year the Prime Minister and his energy minister announced a fuel security package as part of the 2020 budget. Just six weeks later, BP announced its Kwinana refinery would close. In December it was announced that support payments would be brought forward to January of this year, but that still wasn't enough, with ExxonMobil announcing its Altona refinery would close in February.

Let me spell this out very clearly for the government: since this government announced their plan for fuel security in Australia, two refineries—that is, half of the remaining refineries that were left—closed. That's hardly instilling any confidence, is it? In fact, it's not even distilling any confidence. Even with the recently announced support measures, a result of this legislation we are due to pass here, Australia will remain non-compliant with our international energy obligation to hold 90 days of oil reserves. In fact, we only have about 65. We're not even getting close, meaning we will depend disproportionately on imports.

We also still don't have a strategic fleet. We are reliant on foreign owned and operated tankers to move fuel to our country. That's an absolute risk to our sovereign integrity. Our nation's fuel security should be at the forefront of our Defence, defence industry and national security conversations. We don't have another option. It's not like our Defence vehicles are running on hydrogen or are electric. Imagine what the government would say about that. If Labor's electric vehicle policy was going to kill the weekend back in 2019, then a hydro defence vehicle policy in 2021 surely would go the same way as the Hindenburg, according to this government. We need to be serious about this. We need to be backing our Aussie refineries, just as we need to be backing local jobs in our Australian defence industry and in our fuel networks. We need to be backing our national economic security and our national security. We need to be getting more Australian businesses in our defence industry to deliver essential capability that our defence forces rely on, including fuel.

In fact, fuel is an essential capability itself yet, under this government's own policies, half of the refineries in Australia have closed. What a great policy that is! This Liberal government in that context continues to bang the drums of war, but their rhetoric doesn't meet their action in supporting our defence industry, our defence forces or our sovereign fuel reserves. We need to make sure we have no capability gaps. Just as submarines not being in the water in a timely fashion will see a capability gap develop, so too will little more than a week or so of fuel supply in the nation at any given time. There's no point in having great new submarines if we don't have fuel to run them on.

We can't afford to put our nation, our personnel or our people at risk. It's not good enough for this government to be bargain hunting on fuel. COVID has proven that our friends around the world are going to look after themselves before us in a crisis situation, and we should hardly be surprised by this. We need to back ourselves and invest in our fuel supplies and our refineries and the jobs, the technology and the intellectual property that comes with that. If this industry dies out, our nation will be going nowhere on an empty tank.