Australia weighs first refinery in 60 years as Middle East war strains fuel supply

Lead

Australia is weighing the construction of its first new oil refinery in more than six decades, a project that would be led by Perth-headquartered industrial company Perdaman and partly funded by the federal and Western Australian governments. The announcement, made by Prime Minister Anthony Albanese and WA Premier Roger Cook, comes as the war in the Middle East continues to strain global fuel supplies and underscore Australia's dependence on imported liquid fuels.

The federal and WA governments will jointly fund a $4 million pre-feasibility study to examine what it would take to build a large-scale refinery along the West Australian coast, as reported by multiple sources. The study will assess potential sites and the technical and economic viability of the project. If it proceeds, the refinery would be Australia's third large-scale petrol refinery, joining the two currently operating in Brisbane and Geelong.

Coverage comparison

Reports of the announcement were consistent across the outlets covering the story, with all highlighting the dual drivers of energy security and the impact of the Middle East conflict. ABC Australia, The Guardian, and the South China Morning Post all reported the $4 million pre-feasibility study and Perdaman's role as the proposed developer.

Prime Minister Albanese, speaking from Karratha in Western Australia's Pilbara region, framed the project as part of a broader effort to build national resilience. "The longer war in the Middle East goes on, the greater the impact on Australia will be," he said, adding that his government would "do everything we can to shield Australia from the worst effects." The South China Morning Post quoted him saying the project would help build Australia's "resilience and sovereign capability on fuel," potentially shielding the country from future supply shocks.

The federal Resources Minister, Madeleine King, told ABC's AM program that the new facility would aim to secure Australia's supply of refined fuel. She noted that Australia would still need to import crude oil to refine, but argued that crude oil can be stored for much longer than refined fuel, which could be a "critical difference" in times of crisis.

Not all commentators were convinced. Alison Reeve of the Grattan Institute told the ABC's AM program that building a new refinery would not necessarily reduce reliance on overseas products, because "Australia doesn't have very much oil" and would likely need to import crude oil to feed the facility.

The political response has been bipartisan. Shadow Treasurer Tim Wilson indicated the Coalition would support construction of a new refinery in Western Australia, according to ABC Australia.

Key claims

• First new refinery in decades: Multiple reports state that Australia has not built a new oil refinery in more than 60 years. The country currently has just two operating refineries, in Brisbane and Geelong, after a series of closures over the past two decades. BP closed its Kwinana refinery south of Perth in 2021, which was the country's largest.
• Heavy reliance on imports: Australia now imports about 90% of its liquid fuels, according to The Guardian. This reliance has been highlighted by the Middle East war, which has disrupted global supply chains and pushed oil prices above US$100 a barrel.
• Study details: The $4 million pre-feasibility study will be equally funded by the federal and WA governments. It will examine potential sites, including Oakajee, Kwinana, and Kemerton, according to WA Energy Minister Amber Jade Sanderson. She said the Mid West and South West were the main locations of interest.
• Power infrastructure challenges: Power constraints remain a significant hurdle for the Oakajee industrial site, according to Joanne Fabling, chief executive of the Mid West Development Commission. She said a lack of power infrastructure in the Geraldton region was deterring business investment and a 330KV transmission line was needed to connect the whole region.
• Fuel stock levels: Last week, the Commonwealth government confirmed the country had 42 days' worth of petrol, 38 days' worth of diesel, and 32 days' worth of jet fuel, as reported by ABC Australia.
• Perdaman's background: Perdaman, an Indian-owned multinational headquartered in Perth, has interests in fertiliser, pharmaceuticals, property, chemicals, labour hire, and renewable energy. Its flagship project, Project Ceres, is a urea plant under construction on the Burrup Peninsula that is expected to produce 2.3 million tonnes of urea annually.

Perspectives

Government view: Prime Minister Albanese and Resources Minister Madeleine King argue that the refinery would enhance Australia's energy security and sovereign capability, reducing vulnerability to global supply shocks. They highlight the storability of crude oil as a strategic advantage.

Industry and regional concerns: WA Energy Minister Amber Jade Sanderson supports the project, saying a refinery in WA "just makes sense." However, regional development leaders like Joanne Fabling point to power infrastructure gaps that could hinder development, particularly at the Oakajee site.

Skeptical analysts: Alison Reeve of the Grattan Institute questions the effectiveness of a new refinery, arguing that Australia's lack of domestic crude oil means it would still need to import oil, thereby not significantly reducing reliance on overseas products.

Political opposition: Shadow Treasurer Tim Wilson has indicated the Coalition would support the project, suggesting a rare bipartisan consensus on the issue.