The Queensland government is investing US$17.8 million in developing renewable diesel production at Ampol’s Lytton refinery, the first project to receive funding under the state’s new US$128 million Sovereign Industry Development Fund.
The investment will modify Ampol’s existing diesel hydrotreater to co-process conventional diesel with biogenic feedstocks (waste oils, plant oils, and animal fats) to produce renewable fuel for use in existing diesel engines. Construction is expected to begin by mid-2027, with production from 2028.
The numbers
The initial scale is modest. From 2028, the modified refinery is expected to produce around 20 million litres of renewable diesel per year from 15,000 to 10,000 tonnes of feedstock annually. By way of context, Australian diesel consumption sits at around 30 billion litres a year, so the initial output represents a small fraction of national demand.
The longer-term scale is more substantial. The Queensland government has flagged that the investment opens a pathway to future project stages that could produce up to 750 million litres of sustainable aviation fuel (SAF) and renewable diesel by the early 2030s.
The project includes construction of a truck handling gantry, heated and insulated storage tanks with mixing and blending capability, a secondary tank containment system, and system upgrades to process the feedstock.
The strategic position
Queensland Deputy Premier and Minister for State Development Jarrod Bleijie has framed the investment as part of the state’s broader fuel security and industrial development strategy. The Sovereign Industry Development Fund prioritises biofuels, biomedical, and defence as its three focus sectors.
The reasoning for putting biofuels into a fuel security frame is straightforward. Australia’s two remaining domestic refineries (Lytton in Brisbane and Geelong in Victoria) sit at the centre of the country’s fuel resilience picture, with both receiving structural support through the federal Australian Fuel Security and Resilience Package confirmed in the 13 May budget. Adding renewable diesel co-processing at Lytton extends what the refinery can produce without requiring entirely new infrastructure.
For Queensland specifically, the project also positions the state as the first to produce second-generation low carbon liquid fuels domestically. That’s a meaningful claim in the context of state-level competition for clean energy and industrial investment.
The wider fuel landscape
The Lytton announcement sits alongside several recent state-level moves into direct fuel infrastructure. South Australia secured up to 20 million litres of diesel through a commercial arrangement with IOR at Port Bonython. Western Australia agreed with Cambridge Gulf for a four million litre Kimberley reserve. The federal package will eventually deliver a permanent government-controlled fuel reserve of around one billion litres of diesel and jet fuel.
What the Queensland investment adds is direct state involvement in the refining and production side rather than just the storage side. Where SA and WA are buying and holding diesel, Queensland is funding additional production capacity.
For the broader industry, the practical effect is that more diesel will be produced domestically over the back half of this decade, with the renewable fraction growing as the Lytton co-processing scales up. The 750 million litre scale-up scenario, if it lands, would be a material contribution to Australian diesel supply.
Renewable diesel in practice
Renewable diesel produced through co-processing is chemically similar to conventional diesel and runs in existing engines without modification. This is a key distinction from biodiesel, which requires blending limits and engine compatibility checks. Co-processed renewable diesel sits in the same supply chain, the same fuel quality standards, and the same retail infrastructure as the conventional diesel already moving through Lytton.
For fuel retailers and wholesale customers, that means the introduction of renewable diesel from the Lytton modifications won’t require separate tank infrastructure, separate pumps, or different customer communication. It will move through the existing supply chain as diesel.
The sustainable aviation fuel pathway is more complex. SAF is produced to different specifications and is largely targeted at the airline market rather than the road transport fuel pool. The 750 million litre future scale figure combines both SAF and renewable diesel, with the proportion between the two yet to be determined.
Timeline
Construction is expected to begin by mid-2027, with initial renewable diesel production from 2028. The scale-up scenarios for SAF and renewable diesel sit in the early 2030s.
For the rest of 2026 and into 2027, the project will move through approvals, detailed engineering, and procurement. The practical impact on the fuel market won’t be felt until the back end of the decade.
In the meantime, the project is the first concrete piece of additional domestic fuel production capacity to be funded since the federal package was announced. Whether it triggers similar announcements from other states is the next thing to watch.