Viva Energy’s oil refinery in Geelong must stay open if Australia wants to have a hope of becoming a manufacturing powerhouse, says Stephen Bell, chief executive of petrochemical manufacturer Qenos.
He said the threatened shutdown of the country’s second-largest refinery, which has been hit by slumping demand during the COVID-19 pandemic, would mean a critical loss of fuel security and harm a valuable ecosystem of manufacturing supply chains just as state and federal governments look to industry to pull the country out of recession.
“We are in a time when we’re going to be coming out of the ravages and the damage of the pandemic, we need a diverse economy that’s able to to recover as quickly as possible,” Mr Bell said.
“These sorts of industries are critical to that. If they shut down then it just makes it harder.”
The chemical and refining sector in Melbourne was integrated, he said, so if the Viva refinery closed “it would put a lot of pressure on everyone” and “certainly puts the sector at risk”.
“The federal government’s been talking about sovereign industry capability and protecting essential supply chains – this all goes counter to that.
“Shrinking the footprint is going in the opposite direction to what we need to do as an economy.”
Mr Bell’s remarks come a day after Viva chief executive Scott Wyatt said the Geelong refinery could not continue to run without state and federal aid, putting pressure on Canberra as it mulls a policy to support the ailing sector.
Core capabilities at risk
Manufacturing Australia chief executive Ben Eade backed Mr Wyatt, saying Australia could not afford to lose any refining capabilities because it blunted industry’s ability to capture new manufacturing opportunities such as making batteries or medical devices.
“[O]ur ability to commercialise these opportunities and attract investment relies on retaining the core capabilities upon which these new industries rely,” he said.
“Manufacturing is an ecosystem. If you lose one part of a supply chain, you put at risk many others.”
Mr Wyatt said action was also needed from the Victorian government, which has been slow to address shipping and energy cost disadvantages that have left the Geelong plant uncompetitive even against domestic peers.
The closure of three refineries in the past decade has left Australia reliant on imports for more than half its petrol and diesel needs, part of the reason behind Canberra’s strategic fuel storage plan, which has seen all four refineries jostling for contracts with the government to build and manage stockpiles.
Innes Willox, chief executive of the national employer association Ai Group, said losing the plant would increase the nation’s exposure to imported fuels and risk supply chain disruptions.
Rather than provide further subsidies to Viva Energy … there should be an examination of taking public ownership of this refinery.
— Shane Stevens, MUA Victorian branch secretary
“Australia already has a very serious vulnerability from our dependence on imported fuel to run our transport systems,” he said.
“While our refineries support energy security to a degree, they too need to be part of a broader national approach to the management of risks to supply chain disruption because of their heavy dependence on imported inputs.”
The Maritime Union of Australia agreed with Mr Willox, but is gunning for a full public takeover of the plant, which supplies about 10 per cent of Australia’s liquid fuel needs and can process up to 120,000 barrels of oil a day.
“Rather than provide further subsidies to Viva Energy, who are using a slump in fuel demand due to COVID-19 as a bargaining chip to get their hands on taxpayer money, there should be an examination of taking public ownership of this refinery,” MUA Victorian branch secretary Shane Stevens said.
“There is no question that keeping Australia’s four remaining oil refineries in operation is much better than further increasing our reliance on imports of refined petroleum products, but that doesn’t mean handing over millions of dollars in subsidies to private companies is the best option.”
But Australian Strategic Policy Institute senior fellow Paul Barnes said nationalising the plant would be “extreme”, and advocated instead for a temporary government rescue package for an essential service such as refining that also contributes to national security.
“A lot of other industries have been supported by the government and there probably is a case for some very detailed discussion about what can be done to assist,” Dr Barnes said.
“We need to retain certain degrees of domestic refining capacity and so if we lose our existing edge of capacity we’re going to be even more reliant on international supply chains, all of which have been impacted by COVID as well.”
Extracted from AFR