Australia is about three-quarters self sufficient in oil production. Some declines in self sufficiency are projected though new discoveries may delay this estimate.

Australian feedstocks tend to be of the light form, which is complemented by heavier imported forms for lubricating oils and bitumen offset by exports of Australia's lighter forms.

In 1999, the market in Australia was 48 000 megalitres of refined products of which 2 800 (5 per cent) was supplied by imports.

Outlook

The Australian petroleum production capacity for the eight refineries is about 32 million tonnes per year (mtpa) representing 1 per cent of world refining capacity. Average production capacity is around 4.5 million tonnes per year or 100 000 barrels per day ( about one-third the scale of Asian export refineries producing 250 000 to 300 000 barrels per day with new investment at 800 000 tonnes (ca 12 million tonnes per year). Rationalisation of refining capacity in Australia is clearly required to promote expansion of course 'jobs' are at stake.

There have been plans to merge the refining businesses of Mobil and Shell in Australia. (Royal Dutch Shell sold one-half of its interest in Basell). It involved the merger of Shell's Geelong and Clyde refineries and Mobil's Altona and Adelaide refineries. In January 1999, Mobil Oil declared it abandoned the proposed merger. A newspaper reported that Mobil's decision was driven by Exxon's study that indicated that much of the profitability of the Australian refining industry was determined by what happened in Asia's larger and more efficient refineries. In March 1999, Caltex and BP abandoned discussion on a possible merger of refinery operations.

The abandoned mergers could be a portend of closures as the benefit of the merger is insufficient to justify the operation of small scale refineries. Closure of Clyde, and Brisbane's Lytton refinery has been contemplated.

In December 1999, the ACCC had no merger requests for the oil industry.

MTBE Update July 2001

The federal government has announced new standards which will effectively ban fuel with MTBE added by January 2004. It is seen as a compromise between independent retailers which rely on fuel imports with MTBE, and the multinational refineries which have lobbied for an immediate ban citing concerns about groundwater contamination in the event of leaks or spills.

Note: Australian States can set their own standards which may exceed federal standards. WA for example, bans gasoline with MTBE and with a lower benzene requirement.

The Australian Institute of Petroleum signalled that up to three refineries could close following the announcement, with the industry facing transitional costs of more than A$1 billion to upgrade capacity to meet the new national environmental standards. While closures have been raised, Shell said the Clyde refinery ``had a life span beyond 2007" while Mobil said it was ``working very hard to ensure our refineries remain competitive".

The chairman of the ACCC, Professor Allan Fels, said he recognised ``the environmental dimension". But, he added: ``It would have been better that more time had been given because of the significant danger to the competitiveness of the independents".

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