Australia must ensure its liquid fuel security as part of wider energy security policy considerations – and engineers are key to the solution.
Alarm bells over Australia’s energy security began ringing in 2012 when the nation’s liquid fuel reserves slipped below the International Energy Agency’s (IEA) 90-day stockholdings requirement.
Liquid fuel, such as petrol and diesel, accounts for 98 per cent of the nation’s transport fuel and 37 per cent of our overall energy use. It is vital to the nation’s economic and defence security, yet stocks remain below the IEA’s mandated level.
The latest figures from the Department of Energy show that end-of-month stockpiles for October 2018 stood at 27 days of petroleum products, 22 days of petrol and 17 days of diesel.
Over the past decade, Australia has increased fuel imports to 75 per cent of crude and 55 per cent of refined oil products. This follows the closure of three of the country’s seven domestic refineries.
Coalition Senators such as Jim Molan have raised concerns about the country’s fuel supplies being affected by international conflict, and in May last year, former Prime Minister Malcolm Turnbull announced a National Energy Review, beginning with a report on the country’s ability to withstand disruptions to liquid fuel supplies.
A report was due to be delivered in December; however, it is yet to be released, prompting further concern for security experts.
A divided approach
The IEA’s reserve is mandated to ensure that member nations will have enough oil to meet their own needs while also assisting others if global supply disruption should occur. Energy security experts argue that the issue concerns national defence and said it must also be viewed through a lens of social, economic and environmental security.
With a federal election looming, both sides of the political divide are raising fuel security as a key concern. Last year, the government committed to spending at least $23.8 million to purchase ‘tickets’ — options to purchase oil for release to the market — on up to 400 kilotonnes of oil stock holdings from the Netherlands. Meanwhile, Labor has pledged to establish a national fuel reserve if elected.
Senator Molan said that while the nation’s fuel security requires urgent review, increasing fuel stocks is not the answer.
“We have one of the most sophisticated commercial distributions of fuel in the world because we don’t have to hold stocks on the ground, which costs a lot of money,” he said.
“So, commercially, it’s brilliant. In relation to national security, it’s not so good, and that’s what the government is looking at now.”
Molan said the IEA’s recommendation of 90 days of fuel in reserve can include supplies held offshore.
“I don’t think holding stocks on the ground is the key, and this is my personal view,” he said.
“It would be much better for the government to be able to use biofuel or locally produced diesel or the product of our liquid natural gas exports or increase the production of fuel out of our four refineries than to hold stock on the ground.
“The question is, could we make those adjustments in 22 days? Probably not,” Molan concluded.
In a press release from February this year, Shadow Minister for Climate Change and Energy Mark Butler said a Shorten Labor Government would safeguard Australia’s fuel security by boosting fuel stocks.
“Australia used to be a net exporter of oil, but as we’ve become more reliant on the global fuel market we’ve also become more vulnerable to international risks and uncertainty,” Butler said.
If elected, Butler said a Labor Government would commence a “consultation process around the design of a government-owned National Fuel Reserve to boost Australia’s fuel stocks of emergency reserves”.
He notes such a reserve would be an extension of Labor’s commitment to build a National Strategic Fleet to secure access to fuel supplies, even in times of global instability. The fleet would be likely to include up to a dozen vessels including oil tankers, container ships and gas carriers.
Asleep at the wheel?
Retired Air Vice-Marshall John Blackburn chairs the Institute for Integrated Economic Research and has been lobbying to improve fuel security since 2014. He said the government has done “bugger all” to address the matter.
“They are asleep at the wheel,” he said.
Australia is the only developed oil-importing country in the world with no government-controlled stocks of crude oil or refined petroleum products.
“From a current policy perspective, the government doesn’t own any strategic stocks, doesn’t require industry to hold a minimal number of stocks and doesn’t really have any control over the market,” Blackburn said.
“We’re the only developed country that have none of those three. The fundamental thing the government is saying is that it’s a shared responsibility for security.
“That’s just farcical. National security responsibility, of which the economy and energy are a part, can only be held by government.”
Engineering a solution
Engineers Australia’s Energy Security Spokesperson Neil Greet believes the current understanding of energy security places too great a focus on the economic consequences that might arise from a loss of fuel supply.
“Economic arguments are preceding engineering arguments,” he said.
“It results in a sequential way of looking at security as opposed to a collaborative, multidisciplinary approach. I’m not suggesting that this can happen overnight, but we need to change the way we think about energy security.”
This requires a systems-design approach, said Greet, and engineers must play a central role.
“Energy security is not a goal in itself. A Minister can say, ‘I achieved energy security on this day, so vote for me’, but security is not an outcome. It’s a way of thinking and the complacency around this is now starting to fray around the edges,” Greet said.
“Engineers tend to be about solutions. Energy security requires identifying vulnerabilities, thinking through how you mitigate and put a plan together and then adapt as situations change.
“Engineers can provide insight. How do systems vulnerabilities manifest? Do design engineers need to plan beyond the standards of today? How can we be more adaptive? It’s these big questions that go beyond technology.”
Engineers Australia has been advocating for a deeper review of liquid fuel security since 2014 as part of wider energy security policy considerations. Greet expressed frustration that it is falling on deaf ears.
“Operational people aren’t listening to the advice they are being given, and that is a particular beef that I have,” Greet said.
“The advice of engineers is just not getting through to the decision-makers.”
Blackburn advocated for an independent review team, much like the 2017 Independent Review into the Future of the National Electricity Market led by Dr Alan Finkel.
“We need someone of Finkel’s stature and intellect to do an independent review,” Blackburn said
“And the review should include Engineers Australia because it has the depth of engineering expertise.
“Engineers Australia has been consistently talking about this since before the 2015 Senate inquiry [into transport energy resilience and sustainability], and it’s great to see that a professional association like that understands this issue and take it seriously,” Blackburn added.
“What a shame that the government is unable to do the same.”
Given that Australia has large reserves of gas, with the prospect of more as fracking is developed, why is there no examination of one or more gas-to-liquids plants to provide local liquid fuels and improve fuel security and our balance of payments. It is well-established technology; Turkmenistan has just commissioned a large plant, with another announced, using South Korean and Japanese engineering.