Federal government lifts financial support for Viva Energy, Ampol fuel refineries
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The news: The federal government has made it easier for Viva Energy’s Geelong refinery and Ampol’s Lytton refinery to access production subsidies that aims to help the refineries keep running when production costs are high.
While the decision landed amid the ongoing supply shock sparked by the US-Israel war with Iran, a review of the scheme commenced at least six months earlier.
The numbers: The refineries will now begin receiving the subsidy when their refining margins, the difference between the cost of crude and the price of refined fuel, drop below $15.9 per barrel over a calendar quarter. The subsidy will increase on a linear basis before capping out at $2.9 per barrel for margins below $13.
The upper margin limit for which the refineries will receive a subsidy based on actual volumes of gasoline, jet and diesel fuel has been lifted from 6.4 cents per litre to 10 cents per litre.
The lower margin limit to receive the maximum subsidy of 1.8 cents per litre has also been raised from 4.6 cents to 8.2 cents per litre.
The maximum payout of 1.8 cents per litre has not changed.
The context: The updates to the Fuel Security Services Payment (FSSP) follow a six-month review undertaken by the Department of Climate Change, Energy, the Environment and Water with support from Deloitte, which benchmarked cost claims against market conditions.
Climate Change and Energy minister Chris Bowen said the “payment is an important insurance policy” but it was “clear that the design was flawed” as the refiners had only accessed the payments twice since it commenced in mid-2021.
In return for the changes, Bowen said Ampol and Viva are “progressing plans to keep operating into the next decade”.
Ampol has delayed its refinery major maintenance program from early June to the start of August to enable an extra 300 million litres of petrol, diesel and jet fuel to be produced over that period.
Both Ampol and Viva Energy told the exchange that the cost of operating refineries has significantly increased since the FSSP was started.
A phase two review of the FSSP will clarify “Australia’s ambitions with regards to long-term fuel supply resilience, including domestic refining”, according to Ampol. It is expected to be completed by the end of the year.
What they said: “We welcome the adjustments made to the FSSP, which effectively increase the level at which payments under the scheme will commence. The important role Australian refineries play in supporting the resilience of our domestic fuel supply is being reinforced in the current global oil market environment,” Ampol managing director and CEO Matt Halliday said.
Viva Energy CEO and managing director Scott Wyatt said: “Today’s announcement underscores the important role that domestic refining plays in strengthening Australian energy security”.
