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A proposed chemical storage facility for Victoria

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GRAPHICS

Hazard by ERPG

Hazard by IMO

Products & uses

Process chain

Product owners
TEXT
Why ACTED? Economic commentary Products Overview Key recommendations

Overview and background.

Update 2006. The Herald Sun reported.

UP to 15 firefighters who battled the 1991 Coode Island chemical disaster are suffering from cancer including lung disease. Four more have taken their own lives in what has been described as a 15-year time bomb.

September 2001 (From the Financial Review 24 August 2001)

Huntsman Chemical Co of Australia is seeking urgent assurances from the operator of Melbourne's Coode Island hazardous liquids facility. This follows a July 31 decision by Huntsman, Dow Chemical Australia and the State Government to take the Coode Island monopoly away from Terminals Pty Ltd, owned by Burns Philp, and award three-fifths of the work to a New Zealand rival, Marstel Terminals. A week later, Terminals suspended capital spending and withdrew its tanks for benzene, from service. Huntsman had to divert two shiploads of benzene to Sydney at a cost of half a million dollars. The problem could escalate next year because Terminals plans to evict Huntsman and Dow, which stores propylene oxide at the site to make foam, in June, and Marstel's new facility will not be ready until the first or second quarter of 2003, up to a year later. Dow lost $10 million last year, while Huntsman, which brings in two or three shiploads of benzene a month for its $250 million styrene packaging business, is also struggling. 

NOTE: In June 1997, the Victorian Government announced it was abandoning plans to relocate the facility. It has represented a great deal of wasted effort on the part of government, industry and the public. We have no position other than to say that we are not against the facility - it's simply that the NEED FOR IT HAD NOT BEEN PROVEN.

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Background and not updated
The case for Point Lillias has first to be proven and then prioritised against other public funding activities that could help the petrochemical industry in Victoria. Victorian's looking at why Bass Strait gas (very cheap for many years) failed to stimulate any industry providing only cheap petrol (or government revenue and supernormal profits for some), may find my introduction to a guest speaker on the North West Shelf gas development of interest.

Canberra's stand on this could have ramifications on a raft of other national interest issues. We will comment on these later.

We hope the analysis provided with our compliments is of help. Feedback is always welcomed.

 

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The need for a facility

The facility should be predicated on:

1. Safety need - to reduce risks to persons and the environment

2. Economics need - to help the competitiveness of industry (and Victoria).

1. Need based on safety

Though acknowledging a raft of safety issues (such as for example the known carcinogenicity of VCM and benzene), the Emergency Response Procedure Guidelines (EPRG-2) as summarised in Table 18.1 of the Environmental Effects Statement (EES) have been used to address the risk to the public in an emergency.

When broken down by product, the profile is summarised in the following graph.

It shows that only 40 per cent of storage (about the same for throughput), is for products more hazardous than petrol.

The products have been considered as a pollution risk in the report's table 17.4 using the International Maritime Organisation ranking.

The graph shows an even lower proportion - less than one-fifth of products are more hazardous than petrol in the event of a spill.

The point about petrol is that according to the report, ten-times more petroleum is moved through the Port of Geelong than the products proposed for the HCF - and most are less hazardous!

One would have to conclude the need to separately store the majority of chemicals has not been shown.

2. Need based on economics

The next question related to the economic benefit of a HCF for the chemical industry. Is there an economic benefit in terms of helping the chemical industry, employment and the state?

1. As shown later, the chemical industry served is NOT fundamentally integrated with the rest of the chemical industry as implied. The more hazardous chemicals for the HCF are but ONE link in the process chain.

The next step has...
bulletlow real value added;
bulletfew employees (less than 500); and
bulletsafer products than those imported through the HCF.
2. and...
bullettheir end products have no export potential;
bulletoften adds costs to end users (import tariff, though phasing to 5 per cent, and anti-dumping legislation effect);
bulletfor just four mature companies; and
bullet without quantified benefit to Victoria!
The question is, could the need for the HCF be eliminated without cost to Victoria?

Worksafe Australia has always ranked elimination as the first consideration in the hierarchy of control measures to minimise risk. The case for elimination by substitution with next stage chemicals is clearly strong especially when the following is considered for applications of the products.

 

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Applications of HCF products

The ownership and applications of of the products is summarised in the next two tables.

It summarises that:

  1. Key products are imports for low value adding processes (with low employment).
  2. Next step products are safer.
  3. End products have no export potential.
Though the report variously discusses the size of the chemical industry (in extravagant terms), the fact that the products are only for one part of a chain of processing steps is ignored.

This table is relevant.

It is again clear that:
bulletThe products are only one part of the process chain;
bulletThe next step is cost inflated by import tariffs and anti-dumping legislation (consequent by-law entry would result in cost reductions to users); and
bulletThe next step results in safer products.
Preliminerary calculations by ACTED shows their elimination provides a net economic gain to Australia (and possibly Victoria) through reductions in costs to user industries.

 

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Ownership of the products at the HCF

This graph shows the relative significance of ownership of the products. (Option A, ie. without VCM and butadiene).

It shows clearly that one-half the products, and nearly all the more hazardous forms, are for just a few users.

 

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Preliminary conclusions

The need based on economics or safety for the HCF is not proven.

As the reports present themselves...
bulletElimination of some of HCF imported products would.....

    1. Avoid most hazards
    2. Reduce costs to user industries (removal of import duty under by-law)
bulletIn any event as presented, the majority of products could be broadly handled like petroleum.
bulletIf the products are eliminated, any loss to user industries should be evaluated against....
    1. Offsetting gains to downstream industries (eg. plastics, paints, adhesives, furniture etc. confirming the estimations by ACTED)
    2. The public benefit of reduced risks

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The case for product elimination

bulletThe HCF is for products at one step in a succession of process steps. The step selection by industry is a legacy of Australia's protectionist era (most recent investment, benzene to styrene, was 1976 when the import tariff was 30 per cent, five-times higher than present).
bulletFor the next (ie. alternative point of import) process step, employment is less than 500 and.....
bulletThe next process step for all hazardous products is considered by ACTED to add no net economic value and could in most cases be undertaken more cheaply overseas. This because...
bulletCessation of their processing enables withdrawal of cost inflating import tariffs and anti-dumping protection.
bulletCessation of manufacture is provisionally estimated by ACTED to help national gross product (and possibly gross state product of Victoria).
bullet By the criteria included in the December EES report, around two-thirds of products could be handled like petroleum (suggesting most could be handled with 2.5 million tonnes of petroleum at Geelong). bullet Next stage chemicals are safer.

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Therefore.......

The hazardous chemical facility (HCF) appears predicated on the perception that chemicals are hazardous and must therefore be isolated. In an emergency, most of the products have been shown to have petroleum-type hazards. The alternatives and industry economics have not been effectively addressed.

The HCF could still go ahead because....
bullet For the Government of Victoria:
bulletTheir contribution to the cost of $37m is politically cheap to move chemicals from Melbourne to a less influential region.
bullet For industry
bulletWill obtain a subsidy for their facility. (It could even be purchased later at discount if one or more of the current users of products for the HCF follows the trend of industry rationalisation that would test the viability of the owner operators).
bullet The debate is confined to the side issue of the environment. The need for an HCF appears to be outside the terms of reference (13/03/96). bullet The grossly overstated importance of the immediate user industry. There is in fact less than 500 jobs dependent on the next process step in a chain of steps before and after the imported products. The next step could be eliminated with increased jobs in the plastics, paints, adhesives, furniture etc. industries.

For short term political reasons and because the cost is dispersed, the elimination option is likely to be rejected (even though some of the next step activities have doubtful outlooks).

BUT.......

It may in the end prove necessary to move some products through the Port of Geelong or an HCF facility may yet be proven necessary. An objective analysis of long term needs will show the alternatives. The requirements for the near future may be very different than presently being considered.

We do believe.....

The relative decline in Victoria's chemical industry can be arrested. If facilitated, the intellect core in Victoria could help shape a robust internationally competitive industry to return it to its status of the 1970's.

The current debate about the HCF is costly and distracts from core issues.

Therefore considering the two needs

1. ECONOMIC - the case for the subsidy for a few companies has NOT been shown: and

2. SAFETY - NO substantial case shown to differentiate the bulk of the 270,000 tonnes of products from 2.5 million tonnes of petroleum exported through Geelong.

 

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Based on reports to date, the HCF appears avoidable without NET cost to Australia (perhaps also Victoria) or substantially compromising safety and the environment. Any net remaining benefit should be compared to the environmental cost of the proposed HCF.

 

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Sixkey conclusions and recommendations

  1. The alternatives in safety or value to Victoria of an HCF has NOT been shown. There has been exaggeration and vagueness about the economics and hazards.
  2. The debate is the inevitable outcome of past expediency and lack of vision by governments at State and Federal level.
  3. A STRATEGIC PLAN is required for Victoria's chemical industry to tap into its significant competitive advantage.
  4. The decline of the chemical synthesis industry should be arrested. On presented evidence, the HCF at Point Lillias appears largely superfluous to current needs and questionable by long term considerations.
  5. A national interest interest case should be considered.
  6. It may become unviable if established as proposed and represents an unwarranted application of public money. Long term returns are available from tapping into the intellect core of Victoria without substantially compromising safety or the environment. Indeed, the debate could trigger the consideration of a strategically sound chemical industry in Victoria.

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These pages are opinions and not advice. The reader should note the disclaimer


Chemlink Pty Ltd ABN 71 007 034 022. Publications 1997. All contents Copyright © 1997. All rights reserved. Information in this document is subject to change without notice. Products and companies referred to are trademarks or registered trademarks of their respective companies or mark holders. URL: www.chemlink.com.au/

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