Delays in addressing the nation’s low domestic fuel stockpiles — including just 22 days of petrol and 17 days of diesel — have sparked warnings from Coalition MPs and security experts that the nation is dangerously exposed if a major geopolitical upheaval disrupts export supply routes.
The government is under fire for failing to finalise a promised review of how to fix its low onshore petroleum stockpiles — which make Australia non-compliant with International Energy Agency mandates — with some experts suggesting the commonwealth should hold its own fuel supplies as a cushion in the event of an international incident.
Experts have also criticised a government move to spend more than $20 million buying supplies held offshore to bolster the national reserve, saying the move will do little to boost the resilience of the domestic fuel stockpile.
Conflict in or near the Korean peninsula, the South China Sea or the Middle East has the potential to affect Australia’s fuel supply and experts say the country is the “least prepared” among developed nations to deal with a crisis.
Coalition senator and retired major-general Jim Molan told The Australian the delay in the review to address the problem was even more worrying in light of rising geopolitical tensions.
“With increased uncertainty in the Middle East from where much of our oil and refined fuel comes, and the growing uncertainty in our own region due to great power tensions and the unpredictability of the US as a stabilising force, a review of Australia’s liquid fuel reserves is even more crucial now to Australia’s national security,” he said.
“It’s disappointing and potentially dangerous that the review has been delayed, given that the bureaucracy also has to complete an overall energy review in 2019.”
Senator Molan’s concerns were backed by academics and strategic experts.
Samantha Hepburn, director of the Centre for Energy and Natural Resources Law at Deakin University, said the delay was “highly problematic”.
Latest figures produced by the Department of Energy show that end-of-month stockpiles for October stood at 27 days of total petroleum products, 22 days of petrol and 17 days of diesel.
The figures assume no domestic production of crude oil, no refinery production and imports or exports of crude or refined products.
The International Energy Agency uses a different calculation but mandates that net import coverage should not fall below 90 days. As at October, Australia’s net import coverage stood at 56 days. Australia is the only IEA member country that does not meet the standard.
Since October, Australia has moved to boost its reserve number by including “stock held overseas under ticket contracts’’.
Professor Hepburn said this was not good enough “given that the whole point is to ensure its availability in the event of a crisis’’. She said it was “definitely” dangerous for Australia to remain so far under the IEA-mandated days of supply, considering the geopolitical risks.
“The security of Australia’s petroleum supply chains requires urgent assessment. Australia is the only developed oil-importing country in the world that has no government-controlled stocks of crude oil or refined petroleum products,” Professor Hepburn told The Australian. A spokesman for Energy Minister Angus Taylor said the review, which was likely to result in a policy for Australia to comply with IEA standards by 2026, was expected to be finalised “early” this year.
Peter Jennings, head of the Australian Strategic Policy Institute, said the question of how to address Australia’s fuel security had become “more important” and the strategic outlook was “getting worse for Australia”.
“While it’s OK the review might be delayed for a few months if that delay helps to produce a good quality outcome, a concern I would have is just to ask how serious the Energy Department is in producing it.”
Retired air vice-marshal John Blackburn said the government review of fuel stockpiles was already “four years late” and that including fuel held overseas in the calculation would not ensure Australia’s energy security.
“Using the purchase of ‘tickets’ (options to purchase oil for release to the market) … will, in reality, do little to improve our domestic energy security and resilience as the stocks will not physically be held in Australia,” he wrote in a recent opinion piece for Australian Defence. The government has committed to return Australia to compliance with IEA standards by 2026, but a parliamentary committee recently found that the department “could only offer limited assurance that the commitment would be met”.
The government last year committed to spend at least $23.8m to purchase tickets on up to 400 kilotonnes of oil stock holdings from The Netherlands, which the government initially thought would add five days to Australia’s total days of supply.
Shane Gaddes, assistant secretary in charge of international energy at the Department of the Environment and Energy, said domestic demand had diminished this additional supply.
“Since that time, our domestic demand has gone up, so it’s gone down from five days to 3.8 days,” Mr Gaddes said.
The Energy Department said Australia’s low supplies were not a serious concern as there had never been a serious interruption to Australia’s supply.
It also said buying tickets on offshore holdings met IEA obligations as it related to how much fuel all IEA countries could release on to the international market collectively in the event of a crisis. Mr Gaddes said the reason the government did not hold a strategic reserve was that Australia had never had “a significant disruption in the history of the IEA which has impacted on Australia’s supplies”.
Other countries hold more than the IEA’s mandated 90 days of supply.
New Zealand has 93 days of supply, and according to data from the Energy Department, among IEA members only Turkey and Luxembourg have been non-compliant for short periods since 2008 when they dipped to between 86 and 89 days of supply.
Mr Blackburn, who has written reports on this issue for the National Roads and Motorists Association, said the review should be overseen by an independent reviewer and not the Energy Department.
The review of fuel stocks was ordered following a March 2018 recommendation from the parliamentary intelligence and security committee, which said the report should be delivered within six months. The committee recommended that the review be led by the Home Affairs Department in consultation with the Defence and Energy departments.
Extracted from The Australian