The federal and Western Australian governments will jointly fund a $4 million pre-feasibility study into a large-scale oil refinery at Karratha, Prime Minister Anthony Albanese and WA Premier Roger Cook announced in the Pilbara on Tuesday. The proponent is Perdaman, the Perth fertiliser company. If built, it would be the first new large-scale petrol refinery in Australia since the 1960s.
The study is the first agreement signed under a $10 million federal program supporting feasibility work on new or expanded refining capacity, itself part of a $15 billion fuel security package. Perdaman has put the cost of the plant at more than $15 billion. No construction commitment has been made by either government or by the company.
Australia has two refineries left, at Lytton in Brisbane and Geelong in Victoria. Between them they supply 10 to 20 per cent of national fuel demand. Six of the eight refineries operating in 2003 had closed by 2021, and roughly 90 per cent of the fuel Australians burn each day now arrives by ship.
“The longer war in the Middle East goes on the greater the impact on Australia will be, and my Government will continue to do everything we can to shield Australia from the worst effects," Albanese said. Cook put the case in industrial terms: "A fuel refinery in the west will build further resilience into our energy system, keeping our $90 billion mining industry running.”
Perdaman is not new to public money. Its Project Ceres urea plant on the Burrup Peninsula drew $475 million in government loans against a promise of 2.3 million tonnes of urea a year, 2,500 construction jobs and 200 ongoing positions, with the public benefit put at $8.5 billion. The refinery study extends a working relationship between a private proponent and two Labor governments that has so far run on concessional finance rather than equity.
The strategic case has a hole in it that the study will have to address. A Karratha refinery would process crude, and Australia does not produce enough of the right grades to feed it. Without new domestic supply the plant would import feedstock, refine it onshore and remain exposed to the same shipping lanes that the package is meant to insure against.
Saul Kavonic, energy analyst at MST Financial, said the capacity would still be worth having. "Having refining capacity, even without additional new crude oil supply, is still going to help with our resilience, particularly to getting jet fuel and diesel," he said. Diesel is the fuel WA mining and long-haul freight run on.
Sajid Anwar, an economist at the University of the Sunshine Coast, argued the cheaper route to fuel security runs through demand rather than supply, by expanding electrification of transport and cutting the volume of liquid fuel the economy needs at all.
Climate Change and Energy Minister Chris Bowen described onshore refining as "a sensible and prudent response to secure our energy security". WA Energy Minister Amber-Jade Sanderson said the state's response to the fuel crisis had "shored up supply and kept WA moving".
Motorists have been paying for the shortfall at the bowser through a winter of rising crude prices and the end of the excise discount. A refinery, if it clears pre-feasibility, full feasibility, environmental approval and a final investment decision, would not produce a litre of petrol this decade. Pre-feasibility is the first of those steps, and neither government has said when it reports.
