Australia has proposed offering incentives worth A$2.3 billion ($1.67 billion) over 10 years to keep the country’s four remaining oil refineries open and said it would invest in building fuel storage as part of a long-term fuel security plan.
The country’s refiners have been battered by the coronavirus-driven collapse in fuel demand, racking up losses which they say threaten the future of their plants as they compete against much bigger refineries around Asia.
“The government is committed to a sovereign on-shore refinery capacity despite the threat to the viability of the industry,” Prime Minister Scott Morrison said.
To shore up near term fuel security, the government said it would include A$211 million in its upcoming budget to boost storage of diesel, crucial for farms, mines, trucks and back-up power.
“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,” Morrison said in a statement.
The government said it would work with the industry to design a “refinery production payment” as an incentive to keep the four plants open. Together with an exemption from new fuel storage requirements, the incentives would be worth about A$2.3 billion over 10 years.
The four refiners – BP Plc, Exxon Mobil Corp, Viva Energy Group and Ampol Ltd – all welcomed the proposals but made no commitment to keep their plants open.
“There’s recognition the refining sector is at a bit of a critical crossroads and needs the long-term confidence to maintain operations and investment … and I think the package goes a long way to achieving that outcome,” Viva Chief Executive Scott Wyatt told Reuters.
BP and Ampol Ltd said they needed to see details of the measures to understand the impact on their businesses.
Viva’s shares rose 5.4% while Ampol’s rose 1.9%, both easily outpacing a 0.6% rise in the broader Australian market. ($1 = 1.3734 Australian dollars)