downstream petroleum

70 Pages·2017·2.7 MB·English

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D O W N S T R E A M
P E T R O L E U M
C O N T E N T S
AIP mission and objectives
Message from the AIP Chairman
Australian liquid fuel supply and demand
International and Asian refining
Financial performance of AIP Members
Economic contribution of the Industry
Australian refinery competitiveness
National fuel quality standards
Biofuels and alternative fuel
Reducing greenhouse gas emissions
Maintaining supply security and reliability
The international crude oil and product markets
The Australian wholesale fuels market and prices
The Australian retail fuels market
Environment health and safety
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A I P M I S S I O N
A N D O B J E C T I V E S
AIP was formed in 1976 to promote effective dialogue between the oil industry,
government and the community. It replaced a number of other organisations
such as the Petroleum Information Bureau that had been operating in Australia
since the early 1950s. AIP has gained national and worldwide recognition as
the key representative body of Australia’s downstream petroleum industry.
AIP’s mission is to promote and assist in As well as its policy development and
the development of a strong, internationally advocacy role, AIP also runs the Australian
competitive Australian downstream Marine Oil Spill Centre (AMOSC) in Geelong
petroleum industry, operating safely, and Perth to support oil spill preparedness
efficiently, economically, and in harmony with and response by the broader petroleum
the environment and community expecations. industry. AIP also manages or sponsors
important industry environmental and health
Through the active involvement of its member
programs, including CRC CARE and Health
companies, AIP provides responsible and
Watch. The Cooperative Research Centre for
principled representation of the industry
Contamination Assessment and Remediation
along with factual and informed discussion
of the Environment (CRC CARE) undertakes
of downstream petroleum sector issues.
innovative, cutting edge research aimed
This includes through AIP representation
at preventing, assessing and remediating
on key government advisory bodies and
contamination of soil, water and air. For
statutory committees. AIP and member
over 35 years, AIP has also sponsored the
companies advocate government policies
independent Health Watch study which
that are harmonised across all Australian
tracks the health of over 20,000 past
jurisdictions, apply equally to all industry
and present employees of the Australian
participants and are based on sound
petroleum industry.
science supported by comprehensive
economic analysis.
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MEMBER S
• BP AUSTRALIA PTY LTD • MOBIL OIL AUSTRALIA PTY LTD
• CALTEX AUSTRALIA LIMITED • VIVA ENERGY AUSTRALIA PTY LTD
ASSOCIATE ME MBERS
• AFTON CHEMICAL ASIA PACIFIC LLC • PETRO DIAMOND AUSTRALIA PTY LTD
• BHP BILLITON PETROLEUM • PTTEP AUSTRALASIA PTY LTD
• CHEVRON AUSTRALIA PTY LTD • QUADRANT PTY LTD
• CONOCOPHILLIPS • RIO TINTO SHIPPING PTY LTD
• COOPER ENERGY LIMITED • ROC OIL COMPANY LTD
• ENI AUSTRALIA • SANTOS LTD
• HESS EXPLORATION AUSTRALIA PTY • SGH ENERGY PTY LTD
LTD • SHELL AUSTRALIA PTY LTD
• HYDRODEC AUSTRALIA PTY LTD • TEEKAY SHIPPING (AUSTRALIA) PTY LTD
• INPEX BROWSE LTD • TRIANGLE ENERGY LTD
• JADESTONE ENERGY LTD • VERMILION OIL AND GAS AUSTRALIA
• NORTHERN OIL & GAS PTY LTD PTY LTD
• NYNAS (AUSTRALIA) PTY LTD • WOODSIDE ENERGY LTD
• ORIGIN ENERGY RESOURCES LTD • WOOLWORTHS LTD
• PAPUAN OIL SEARCH LTD
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M E S S A G E
F R O M T H E A I P
C H A I R M A N
Downstream Petroleum outlines the key facts on Australia’s downstream
petroleum industry and the key issues faced by this highly competitive sector.
The Australian petroleum industry plays a key financial incentives provided by governments.
role in the economy, providing major direct Additionally, ongoing global surplus capacity
and indirect economic benefits from its own has depressed the margins available to
activities and underpinning the performance refineries over the last decade, challenging
and competitiveness of the transport, mining the commercial viability of many existing
and agriculture sectors. As a technologically refineries in Europe, North America and
advanced industry, the refining industry Japan. In Australia, three refineries have
employs and trains many highly skilled staff closed since 2008.
and international expertise flows into the
Australian economy and workforce.
The industry has a proud and longstanding
record of safely and reliably manufacturing
and supplying high quality, competitively
priced fuels to industry and consumers.
However, for much of the recent decade, the
Australian industry has faced considerable
international and domestic challenges.
Major structural changes in the global
petroleum markets continue to be driven by
intense competition and trade in oil markets,
new cost competitive sources of refinery
feedstocks and liquid hydrocarbons, and the
continued construction of mega refineries
in Asia and the Middle East to service both
the major source of global demand growth
from this region and import markets globally,
including Australia.
These mega refineries have significant scale
and technology advantages, supported
by substantial cost advantages and, often,
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The Australian refining industry is responding Australian consumers are benefiting from
to these market pressures through stringent the direct link between domestic fuel prices
cost control, enhanced operational and competitively priced fuels from the Asian
efficiencies, and by fully integrating into the market where there is ready and diverse
rapidly expanding Asian fuels market. This access to Australian grade fuels.
is necessary to meet the challenges of more
recent issues such as rapidly escalating
CONSEQUENTLY, PETROL AND
domestic energy prices. Alongside these
DIESEL PRICES IN AUSTRALIA
initiatives, industry has more recently
CONTINUE TO BE AMONGST THE
committed to very significant investment
LOWEST IN OECD COUNTRIES
programs across their supply chains, in
particular in their refineries, to maintain safe
and reliable operations, remain competitive,
and to strengthen the reliability and flexibility
of operations and commercial supply chains.
MAJOR INDUSTRY INVESTMENT, OF
$2 BILLION OVER THE LAST FIVE
YEARS, SHOWS A COMMITMENT TO
CONTINUE REFINING PETROLEUM IN
AUSTRALIA

This is important for Australia’s supply
security, as refineries provide a key source
of liquid fuel supply for the economy, add Australian consumers also enjoy access to
diversity to the mix of fuel supply and provide a diverse range of high quality fuels in the
a convenient market for the processing domestic market. Consumer choice and
of some local crude and condensate vehicle technologies are driving higher use
production. of premium grade petrol, despite declining
overall petrol use and government programs
Over many years, government and
and incentives intended to favour alternative
independent reviews of Australia’s energy
fuels like ethanol blended petrol. Official
security have endorsed the efficiency,
government assessments confirm that petrol,
diversity and resilience of our liquid fuel
diesel and jet fuel will remain the major
supply chains and the key role of our
liquid fuels in Australia in the foreseeable
refineries. These reviews also confirm
future. But we know the market is evolving,
Australia’s effective integration into the
including with strong community interest in
Asian fuels market - the global refining and
new technologies such as electric vehicles.
trade centre.
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The industry is confident in meeting global The key role for governments is to ensure
market challenges and consumer fuel needs a competitive open market and a level
even though the cost of doing business in playing field for local market operators,
Australia (including labour and construction whilst ensuring that the local industry is not
costs and tighter regulatory requirements) competitively disadvantaged to our regional
remains substantially higher than for our counterparts and that innovation continues
Asian competitors. to be fostered.
Further escalation of government and To achieve these goals, a clear and stable
regulatory requirements will have a significant longer term policy framework based on
impact on the commercial viability of sound market principles provides the best
fuel supply operations, in particular local environment for a competitive Australian
refineries so government policy has a critical refining industry and for the significant
role to play. ongoing investments needed in refineries and
liquid fuels infrastructure. Policy stability and
The refining industry faces a complex and
a strong market based approach requires
expensive investment to produce 10ppm
that any new policies or market interventions
sulfur petrol which has the potential to
are based on a demonstrated net community
threaten the viability of the industry. While the
benefit or market failure, are harmonised
refining industry recognises the government
across jurisdictions, apply equally to all
imperatives, it is absolutely critical that
industry participants and are well integrated
sufficient time is provided to make these
with other policies applying to industry.
investments and that government consider
positive incentives. To this end, the industry The Australian petroleum industry remains
has proposed 1 July 2027 as an appropriate fully committed to ensuring ongoing reliable
start date for compliance with this new fuel supply of affordable and quality fuels to
standard. the Australian market, through continued
investments and tough decisions to improve
The industry already faces a highly complex
productivity and economic viability.
policy environment regulated by federal,
state and local governments, where new There is an equally strong commitment to
unjustified cost imposts on refineries or the ongoing safe industry operations meeting
broader fuels industry remain a key pressure community and environmental standards,
on ongoing competitiveness and viability. supported by significant investment in
In this regard, the industry is engaged leading health, safety and environmental
in a number of key policy areas creating AIP programs.
potential business cost pressures, including
fuel quality regulations, vehicle emission Scott Wyatt
standards, alternative fuels, climate change Chairman, AIP
and retail regulation.
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A u s t r a l i a n l i q u i d
f u e l s u p p ly a n d
d e m a n d
KEY MESSAGES
• The Australian refining industry is a price • Growth in imports reflects the gap between
taker in the Asian region, and there is a fuel demand and production from Australia’s
direct relationship between Australian and four oil refineries which must compete with
Asian fuel prices. imports from Asian refineries.
• Industry profitability is largely determined • Australian refineries typically meet around
by supply and demand in the Asian refining 65% of petrol demand in Australia and 45%
market. of overall fuels demand.
• There is currently significant surplus of • In recent years, there have been large
supply of petroleum products in the Asian investments in maintenance cycles (called
region. ‘turnarounds’) at Australian refineries,
involving the shutdown of some production
• Demand for petroleum products has not
units for major upgrades and maintenance.
been strong enough to absorb the output
Reduced refinery production and a greater
from new refinery capacity installed in Asia
reliance on imports is typical during
each year for the last decade.
turnarounds, which occur every 4-6 years.
• Asian excess supply capacity has provided
• With a diverse source of supply from both
a ready source for fuel imports to Australia,
domestic production and imports, the
including growing petrol imports by
Australian downstream petroleum industry
independent fuel suppliers.
will continue to provide reliable supplies to
consumers at competitive market prices.
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In 2016–17, Australia’s domestic refineries supplied around 43 percent of
total petroleum products required by Australia’s major industries and the fuel
distribution network of around 7,000 service stations. The reliability of the fuel
supply chain is robust given the unique logistic and geographic challenges
in Australia.
Australian petroleum refineries are highly It also produces a substantial volume
capital intensive, technically sophisticated of chemical feedstock.
facilities that employ a wide range of highly
In 2016–17, Australia consumed 58,400 ML
skilled personnel and provide significant
(mega litres) of petroleum products - or
economic and other benefits to key Australian
around 160 ML per day - a 9.1% increase
industries.
since 2010-11. Australian refineries produced
The Australian oil refining industry 25,000 ML of petroleum products, of which
produces a range of petroleum products around 4.7% was exported (excluding LPG).
comprising:
PETROL DIESEL JET FUEL
(44%) (35%) (14%)
OTHER PRODUCTS
FUEL OIL LPG AND CHEMICAL
(3%) (3%) FEEDSTOCK (1%)
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Net imports from over 20 countries accounted for While Australia has its own indigenous crude oil
57 percent (or 33,400 ML) of total consumption, production, this has been declining and around
as highlighted in the following chart. A proportion 79 percent was exported in 2016–17. These
of this imported volume was supplied to northern crudes are largely unsuitable for Australian
and north western areas of Australia where it is refineries to manage their product slate, while the
more economic to supply directly from Asia due locations of Australian refineries also contribute
to domestic refinery locations and local terminal to the quantity of exports. Crude oils required
configuration. to meet the product demand mix in Australian
refineries were imported from over 16 countries,
Numerous import terminals are located around
but mainly from the Asia-Pacific region (64 %
Australia providing ready access to the Australian
percent) including New Zealand and PNG. The
market. The bulk of imported fuel came from
remaining third of crude oil imports was sourced
refiners and regional suppliers in South Korea,
from Africa (18%), the Middle East (16 %) and
Singapore and Japan, and imports from India are
others (2%).
increasing.
R E F I N E R I E S A N D M A J O R F U E L I M P O R T T E R M I N A L S
3
4
1
Geelong (Viva Energy - Victoria) 1
2
2 Altona (Mobil - Melbourne)
3 Lytton (Caltex - Brisbane)
4 Kwinana (BP - Kwinana Western Australia)
Port/Terminal