Petroleum import infrastructure in Australia Executive Summary Prepared for the Department of Resources, Energy and Tourism August 2009 Reliance and Disclaimer The professional analysis and advice in this report has been prepared by ACIL Tasman for the exclusive use of the party or parties to whom it is addressed (the addressee) and for the purposes specified in it. This report is supplied in good faith and reflects the knowledge, expertise and experience of the consultants involved. The report must not be published, quoted or disseminated to any other party without ACIL Tasman’s prior written consent. ACIL Tasman accepts no responsibility whatsoever for any loss occasioned by any person acting or refraining from action as a result of reliance on the report, other than the addressee. In conducting the analysis in this report ACIL Tasman has endeavoured to use what it considers is the best information available at the date of publication, including information supplied by the addressee. Unless stated otherwise, ACIL Tasman does not warrant the accuracy of any forecast or prediction in the report. Although ACIL Tasman exercises reasonable care when making forecasts or predictions, factors in the process, such as future market behaviour, are inherently uncertain and cannot be forecast or predicted reliably. ACIL Tasman shall not be liable in respect of any claim arising out of the failure of a client investment to perform to the advantage of the client or to the advantage of the client to the degree suggested or assumed in any advice or forecast given by ACIL Tasman. © ACIL Tasman Pty Ltd This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism or review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgment of the source is included. Permission for any more extensive reproduction must be obtained from ACIL Tasman on (03) 9600 3144. ACIL Tasman Pty Ltd ABN 68 102 652 148 Internet www.aciltasman.com.au Melbourne (Head Office) Brisbane Canberra Level 6, 224-236 Queen Street Level 15, 127 Creek Street Level 1, 33 Ainslie Place Melbourne VIC 3000 Brisbane QLD 4000 Canberra City ACT 2600 Telephone (+61 3) 9604 4400 GPO Box 32 GPO Box 1322 Facsimile (+61 3) 9600 3155 Brisbane QLD 4001 Canberra ACT 2601 Email [email protected] Telephone (+61 7) 3009 8700 Telephone (+61 2) 6103 8200 Facsimile (+61 7) 3009 8799 Facsimile (+61 2) 6103 8233 Email [email protected] Email [email protected] Darwin Suite G1, Paspalis Centrepoint 48-50 Smith Street Darwin NT 0800 Perth Sydney GPO Box 908 Centa Building C2, 118 Railway Street PO Box 1554 Darwin NT 0801 West Perth WA 6005 Double Bay NSW 1360 Telephone (+61 8) 8943 0643 Telephone (+61 8) 9449 9600 Telephone (+61 2) 9389 7842 Facsimile (+61 8) 8941 0848 Facsimile (+61 8) 9322 3955 Facsimile (+61 2) 8080 8142 Email [email protected] Email [email protected] Email [email protected] For information on this report Please contact: Alan Smart Contributing team members: Telephone 02 6103 8201 Yuan Chou Mobile 0404 822 312 Ken Willett Email [email protected] Antonia Hodby Petroleum import infrastructure in Australia Contents 1 Introduction 1 1.1 Terms of reference 1 1.2 Background 1 1.3 Methodology 2 2 Characteristics of import infrastructure 2 2.1 Determinants of import capacity 3 2.2 Ownership and commercial arrangements 3 3 Location, infrastructure and capacity 4 3.1 Refineries 6 3.1.1 Petroleum refineries in Australia 6 3.1.2 Annual throughput of product through refineries 7 3.2 Import terminals 7 3.2.1 Location and capacity 7 3.2.2 Storage capacity and throughput 12 4 Ownership and usage arrangements 13 5 Capacity Utilisation 15 6 Committed and planned capacity expansions 17 7 LPG 19 8 Adequacy to meet future demand 22 8.1 New South Wales 22 8.2 Victoria 23 8.3 Queensland 24 8.4 Western Australia 24 8.5 South Australia 25 8.6 Tasmania 26 8.7 Northern Territory 27 9 Current and potential barriers to competition and efficient investment 28 9.1 Competition 28 9.1.1 Availability of imported petroleum products 28 9.1.2 Access to terminal capacity 29 9.1.3 Pricing policies 29 9.2 Conclusion on level of competition in the fuel import supply chain 31 9.3 Constraints on efficient investment 32 iii Petroleum import infrastructure in Australia 10 Key findings and strategic issues 33 10.1 Adequacy to meet current and forecast demand 33 10.2 Fuel standards 34 10.3 Barriers to competition 34 10.4 Petroleum statistics 34 10.5 Planning 35 10.6 Recommendations 35 List of figures Figure 1 Petroleum Import Infrastructure in Australia 5 List of tables Table 1 Australian Refineries 6 Table 2 Crude Oil and product storage at refineries in Australia 6 Table 3 Throughput from refineries by State 2007-08 7 Table 4 Petroleum product terminals in NSW 8 Table 5 Petroleum product terminals in Victoria 8 Table 6 Petroleum product terminals in Queensland 9 Table 7 Petroleum product terminals in Western Australia 10 Table 8 Petroleum product terminals in South Australia 11 Table 9 Petroleum product terminals in Tasmania 11 Table 10 Petroleum product terminals in the Northern Territory 11 Table 11 Summary of storage capacity at terminals in Australia by State 12 Table 12 Terminal throughput by State in 2007-08 12 Table 13 Ownership arrangements at petroleum import terminals in various States and Territories 14 Table 14 Capacity utilisation at product import terminals in Australia 16 Table 15 Investment in new capacity at product import terminals in Australia 17 Table 16 Situation after committed investments have proceeded and been completed 20 Table 17 LPG storages in Australia 21 Table 18 Current and projected demand for petroleum products in NSW (ML) 22 Table 19 Current and projected demand for petroleum products in Victoria 23 Table 20 Current and projected demand for petroleum products in Queensland 24 Table 21 Current and projected demand for petroleum products in Western Australia 25 Table 22 Current and projected demand for petroleum products in South Australia 26 Table 23 Current and projected demand for petroleum products in Tasmania 27 Table 24 Current and projected demand for petroleum products in the Northern Territory 27 iv Petroleum import infrastructure in Australia 1 Introduction 1.1 Terms of reference This report was commissioned by the Department of Resources, Energy and Tourism to address the outlook for supply and demand for imported crude oil and petroleum product and the capacity of Australia’s existing import infrastructure to meet foreshadowed petroleum import requirements. The adequacy of existing and planned infrastructure is to be assessed and any barriers to competition and efficient investment identified. 1.2 Background Despite relatively high levels of domestic oil production in the past, imports of crude oil and refined petroleum products have always played an important role in supplying the Australian demand for liquid petroleum fuels. Imports of crude oil increased gradually over the past twenty years as production from Australia’s producing fields in the east declined, peaking at around 30,000 ML per annum in 1998-99. Australia’s imports of petroleum products were less than 5,000 ML per annum until 2002-03, when they increased to around 10,000 ML per annum following the mothballing of Mobil’s Port Stanvac Refinery. Imports were around 19,000 ML per annum by 2007-08 and are expected to continue to rise as demand for petroleum products grows. A number of policy issues have emerged concerning levels of competition in the Australian petroleum products market and the adequacy of infrastructure as imports of petroleum products increase. The Australian Competition and Consumer Commission (ACCC) report Petrol Prices and Australian Consumers, released in December 2007, discussed the role of independent importers as competitors in the Australian petroleum products market. In its report the ACCC concluded that the four domestic refiner marketers were able to dominate the market (ACCC, 2007). The report noted that the most significant competitive threat to domestic refiner marketers would be large scale importing of petrol by a reseller or independent retailer. The ACCC recommended that: • a comprehensive audit of terminals suitable for importing refined petrol in Australia. The audit should cover current and future terminal capacity, current and future use of terminal capacity, as well as terminal leasing and sharing arrangements. Introduction 1 Petroleum import infrastructure in Australia • following the audit, there be on-going monitoring of the use, leasing and sharing of terminals suitable for importing refined petrol into Australia. In April 2008, the Government announced its support for the ACCC’s recommendations for a comprehensive audit of terminals and subsequently announced the Department of Resources, Energy and Tourism would manage the audit. The ACCC released a further report on petrol prices in December 2008 which, among other things, discussed the level of import competition in the Australian market (ACCC, 2008). In this report the ACCC noted The refiner–marketers accounted for about 93 per cent of the petrol imported into Australia in 2007-08. This high share is unsurprising because the refiner–marketers control most terminals that are capable of receiving imports. Of the 55 terminals around Australia that are capable of receiving imports, 46 of these are owned by the refiner–marketers while a further four are controlled by them through lease arrangements. Consequently, the constraint imposed by actual or potential import competition is reduced. 1.3 Methodology The audit was conducted through a questionnaire that was sent to the refiner- marketers and independent terminal operators.