Australia will consider building its first new oil refinery in more than 60 years, Prime Minister Anthony Albanese said on Tuesday, as war in the Middle East squeezes global fuel supplies and underscores the urgency to improve energy security, according to Reuters.
Government Commitment to Energy Security
Albanese stated that the project will help build Australia's resilience and sovereign capability on fuel, potentially shielding the country from future supply shocks. The federal government and the Western Australia state government will jointly spend A$4 million ($2.8 million) on a feasibility study for the refinery, according to Reuters. "We want to make sure that we get the right location but we want to make sure as well that it's a project that stacks up, that can go forward," Albanese added.
Australia’s Heavy Reliance on Fuel Imports
Australia depends on imports for about 80% of its fuel needs and has been racing to secure supplies amid the Iran war, Reuters reported. The government's push to cut import dependence follows an Australian Treasury report warning that the global oil market has become more vulnerable "with weaker buffers against supply shocks."
The treasury said in a briefing provided to Treasurer Jim Chalmers over the weekend that global oil inventory levels have dropped since conflict in the Middle East intensified, while refined fuel markets are now at risk of tightening further.
Decline of Domestic Refining Capacity
Most of Australia's domestic oil refineries were built during the 1950s and 1960s, but high operating costs and the emergence of large refineries across Asia forced many to shut down over the past three decades. Currently, only two refineries remain operational, compared to eight in 2000.
| Year | Number of Refineries | Details |
|---|---|---|
| 2000 | 8 | – |
| Present | 2 | Ampol's Queensland refinery and Viva Energy's Victoria facility |
| 2021 | Kwinana shut | BP converted 146,000 bpd plant into fuel import terminal |
Feasibility Study and Next Steps
If the project proves feasible, the new large-scale oil refinery will be built by industrial chemical producer Perdaman in Western Australia, Albanese said. The location remains to be finalized as part of the study. "One of the things that building national resilience does is it makes Australia less vulnerable to the impact of events around the world," Albanese said from Karratha in the Pilbara region.
Supply and Demand Dynamics
The Iran war has tightened global oil markets, with inventory levels dropping and refined fuel markets facing additional risks, according to the Treasury briefing. Australia's push to boost domestic refining capacity comes as a response to these external shocks, but the new refinery would take years to complete and would not address immediate supply gaps. The feasibility study is expected to assess commercial viability and infrastructure requirements.
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