Fuel security: why is there none? 

The Maritime Union of Australia has again drawn attention on the Morrison Government’s refusal to act on fuel security after years of warnings, with new figures showing Australia now has just 22 days of petrol and 17 days of diesel at its disposal.
Australia has been non-compliant with the International Energy Agency’s 90-day fuel stockholding obligation since March 2012 and the current government has since ignored several key reports.
For example, a National Energy Security Assessment was announced last April. It was sparked by concerns over declining domestic production, diminishing refining capacity and concerns over potential flashpoints in the Middle East, South China Sea and Korean Peninsula.
However, nothing has been done since then and a report in today’s Australian newspaper said the new figures have again sparked warnings from Coalition MP and security experts that the nation is dangerously exposed if a major geopolitical upheaval disrupts existing supply routes.
The newspaper said experts have also criticised a government move to spend more than $20 million buying supplies held offshore to bolster the national reserve, saying the move will do little to boost the resilience of the domestic fuel stockpile.
MUA national secretary Paddy Crumlin said a number of inquiries and reports in recent years have focused on the important issue of fuel security, including the MUA’s report titled ‘Australia’s Fuel Security – Running on Empty’ in December last year, written by shipping expert John Francis.
“The Senate has held inquiries into both fuel security and tax avoiding flag-of-convenience shipping, while the Energy White Paper and Defence White Paper also investigated our increasing reliance on foreign fuel,” Mr Crumlin said.
“It’s doubling up on the government’s initial policy negligence in allowing Australia to lose its refinery capacity of oil we own and is sourced in our country, and then allow tax avoidance and dodgy shipping governance to replace our domestic shipping capacity. No one has been at the wheel of energy security in Canberra for a very long time. It’s a joke with very few laughs for Australian jobs, economic independence and long term planning.
“In addition, the ‘Running on Empty’ report found that Australia now relies on the equivalent of almost 60 full-time fuel import tankers to keep us supplied with petrol, diesel and jet fuel, which is now all carried on the international spot market, mainly from Korea, Singapore and Japan.
“The report found Australia’s reliance on foreign flagged tankers removes any opportunity for the Commonwealth to be able to requisition national flag tankers if necessary to secure minimum import or coastal distribution requirements following major economic or geopolitical disruptions.
“The cost of addressing this risk is comparatively low: even carrying Australia’s entire import volume on a fleet of Australian tankers would cost less than one extra cent per litre.
“The Australian government needs support as a matter of urgency a number of Australian tankers as part of a national strategic fleet to ensure that some level of supplies can be maintained in the event of a crisis.”
Mr Crumlin said there are now no Australian-crewed tankers supplying fuel to our nation, down from 12 in the year 2000. At the same time, the number of refineries has halved to four. This means we now import more than 90 per cent of our fuel and that number is rising.
“Australians would expect our Government to have a better plan and this would involve more refining here and Australian-crewed ships to carry it around the coast,” he said.
“This isn’t only a matter of fuel security but also national security. Unlike Australian seafarers, foreign crews have no background checks yet they are carrying petroleum products, ammonium nitrate and LNG around the Australian coast.”

Fuel prices hit four-year high as retailers boost margins

Average petrol prices increased by seven per cent in the past three months, hitting a four-year high in real terms of around 145 cents per litre (cpl) in Australia’s largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth), according to the ACCC’s latest petrol monitoring report.
Annual average prices in the five largest cities in real terms steadily fell between the 2013-14 and 2016-17 financial years. However, in 2017-18 the average price of petrol increased overall by nearly 10 per cent compared with the previous year.
“The major factors driving higher prices were an increase in international crude oil and refined petrol prices, and a lower AUD-USD exchange rate,” ACCC chairman Rod Sims said.
“The OPEC cartel in particular continues to have a damaging effect on Australian petrol prices. In late-2016 OPEC, and some other crude oil producing countries, agreed to cut production. This restricted supply into the market, which has clearly started to bite through steadily increasing petrol prices in the past financial year.
“A weaker Aussie dollar has also increased costs for wholesalers buying petrol for the Australian market, which flows through to consumers who pay for this at the pump,” Mr Sims said.
While higher global oil prices are the major factor, the ACCC report also shows that the gross margins Australian petrol retailers are obtaining for every litre sold are also adding to the price pressure motorists experience. Average gross retail margins hit a record high in 2017-18. Annual average gross indicative retail differences (GIRDs), a broad indicator of gross retail margins, in the five largest cities in 2017-18 were 12.4 cpl. This is 4.3 cpl higher than the average in real terms over the last 16 years.
“Current gross retail margins in the five largest cities are now over 50 per cent above the 16 year average since the ACCC began tracking this data,” Mr Sims said.
Brisbane motorists continue to pay the highest price for petrol of the five major cities. This continues a trend that has seen Brisbane prices being the highest of the five major cities for 18 of the past 24 months.
Regional petrol prices
The average differential between prices in the regional locations the ACCC monitors and the five largest cities fell by 1.0 cpl in 2017-18, compared with 2016-17. However, motorists in these regional locations were still paying an average of 4.4 cpl more for their petrol in 2017-18.
The ACCC has undertaken four regional petrol market studies in Darwin, Launceston, Armidale and Cairns and continues to monitor prices and margins in these locations.
“In all these locations, gross retail margins and prices continue to remain high. However it’s worth noting that prices in Cairns, while still high, are getting more competitive. This correlates with more vigorous competition following independent retailer United increasing its presence in the Cairns area,” Mr Sims said.
“This example demonstrates the value for consumers of having competition in petrol markets.”
Background
The ACCC collects retail petrol prices for all capital cities and over 190 regional locations across Australia.
On 20 December 2017, the Treasurer issued a new direction to the ACCC to monitor the prices, costs and profits relating to the supply of petroleum products and related services in the petroleum industry in Australia.
Under the new direction, the ACCC produces quarterly petrol monitoring reports focusing on price movements in the capital cities and over 190 regional locations across Australia. It also produces industry reports that focus on particular aspects of consumer interest in the fuel market in relation to prices, costs and profits. Today’s report was the fourth issued under the direction.
Gross retail margins are the difference between average retail prices and average wholesale prices. As they do not include costs, gross retail margins should not be confused with actual retail profits. These margins are averages across the five largest cities over time. The level of prices, costs and profits vary significantly between retail operations and not all petrol retailing sites will be achieving these margins. Some will be achieving higher margins, others lower.

Annual average GIRDs in the five largest cities in real terms: 2002-03 to 2017-18. The analysis about savings from price cycles was not undertaken for Perth because it has regular weekly price cycles.

UGL wins BP maintenance contract

UGL has won a three year contract for maintenance at 17 BP fuel terminals across Australia.

The contract will see the two companies form a 50/50 joint venture to carry out the operation.

According to UGL, the agreement is worth approximately $190 million over the initial three year period, and includes an option to extend the contract for a further three years on an ongoing basis.

Through the JV, UGL will provide all the engineering, maintenance, and project works for BP’s Australian fuel terminal network.

Mobilisation has already begun.

“UGL has a longstanding relationship with BP since the 1990s, providing maintenance services at BP Kwinana refinery in WA,” UGL CEO Ross Taylor explained.

“We are proud to extend our relationship with BP under this new major contract and play a role in supporting BP’s investment plans as it extends its retail fuel network across Australia over the next three years,” he said.

“Securing this contract reflects UGL’s position as a leading asset services provider to the downstream oil and gas industry in Australia.

“Combined with UGL’s recent contract wins in LNG maintenance, we are well positioned to deliver solid growth in our base of recurring revenue streams from FY16.”

Caltex delivers big diesel savings for Brisbane Truck Show delegates

Leading transport fuels supplier Caltex Australia is offering a discount
of 8.25 cents per litre for diesel customers attending the 2015 Brisbane Truck
Show this week.

Available exclusively for Brisbane Truck Show delegates, the three-month
discount offer is redeemable at Caltex’s industry-leading National Truck
Network (NTN) comprising of over 200 fuel locations. NTN is Australia’s largest
network of sites specifically designed to accommodate heavy vehicles.

Caltex Australia General Manager Marketing Bruce Rosengarten explained that
locations forming part of the NTN would offer the discount on the full range of
high-quality diesel products.

According to Mr Rosengarten, the high competition in the transport
industry is encouraging heavy vehicle operators to look for ways to make their
businesses more efficient, reduce operational costs and improve productivity. Caltex
Australia launched the NTN last year in response to the needs of their customers.
The fuel discount introduced this year will help their customers save on fuel
expenses while introducing them to Caltex’s range of advanced fuel and
lubricant solutions.

Since the launch of the NTN in 2014, Caltex has invested in further network
expansion and increased the availability of AdBlue at the pump.

Along with the fuel discount offer, Caltex Australia is also giving away
a chance to win a V8 VIP Experience, including a hot lap with 2014 V8 Supercars
champion Jamie Whincup and motor racing legend Craig Lowndes.

Caltex Australia is showcasing their products on stand 117 at the
Brisbane Truck Show.

The Brisbane Truck Show runs until Sunday 17 May.

Caltex shuts down refinery process units, moves to export

Caltex has shut down the last of its fuel refinery process units, and started operation of the site as a fuel import terminal.

It first announced the shutdown of the refinery in 2012 following a review that found “without substantial investment” it would not be economic to continue operations as “it still could not become competitive with newer, larger scale plants in the region”.

The oil and lubricants company went on to outline a $270 million plan to upgrade the site into a major fuel import terminal, with today’s announcement officially opening the new terminal.

“This represents a significant milestone in the two year project to convert the historic refinery site to Australia’s largest fuel import terminal,” Caltex said in a company statement.

The new terminal will provide around 750 million litres of storage capacity and supply fuel to retail sites and commercial customers across NSW and the ACT.

Of the $270 million slated for the conversion of the site, around $40 million has been deferred until next year “for operational efficiency reasons,” Caltex said.

This includes additional upgrades to the wharf and final tank conversions once the refinery is fully closed.

Additional site works include demolition of redundant plat and remediation of the site.

Speaking on the conversion Caltex Australia chief Julian Segal said this marks the transformation of Caltex from two businesses, refining and marketing, into a single integrated transport fuel supply chain company.

“The strong progress of the closure and conversion works has presented Caltex with the opportunity to undertake a company-wide cost and efficiency review, which we announced on 25 August 2014,” Segal added.

Fuelling the industry

While major capital
equipment costs hit mining companies hard, it is the everyday costs associated
with keeping these pieces of capital equipment in top shape.

When it comes to
diesel fuel, there is little the industry can do, as the fuel is literally the
life blood of the industry – without it every single part of the resources
industry (as well as transport and logistics associated with it) grinds to a
swift halt.

Even when the proposed
abolition of the diesel fuel rebate scheme reared its head, there was little
the mining industry could do if it had passed, as fuel plays such as critical
part.

In 2007 BHP used more
than 1400 megalitres of diesel – accounting for more than five per cent of
Australia’s total diesel consumption , and in 2013 used 2041 megalitres of
distillate and gasoline, demonstrating the consistently rising demand for fuel
and in turn the significantly rising costs associated with it.

In fact after labour
costs fuel is the next biggest expense for miners.

However there are
steps miners can take to get more out of their fuel.

Using more fuel
economical vehicles, using additives, using cleaner fuel – are all options for
companies, but not all fuels are the same.

It’s not unusual to expect ISO (International Standards Organisation)
cleanliness levels for new fuel or oil to arrive at a customer with a
cleanliness level of ISO 22/21/18.

This three-digit ISO code denotes the number of particles larger than 4
microns, 6 microns and 14 microns you would find in a sample of 100 millilitres
of fluid.

In other words, in 100ml of oil or fuel with an ISO count of 22/21/18
you could have approximately two to four million particles larger than 4
microns, one to two million particles larger than six microns and between one
hundred and thirty thousand and a quarter of a million dirt particles larger
than fourteen microns.

For new, clean diesel fuels operators would expect ISO 14/13/11 for
their site.

In two independent
studies examining injector wear with a known concentration of two parts per
million of test dust, it was shown that 5 per cent of injector wear took place
in the first three hundred miles of driving, and 20 per cent took place over
the next three hundred thousand miles.

According to studies carried out by fuel filter manufacturer Donaldson if fuel is cleaned to an ISO cleanliness level of 14/13/11 compared
to fuel that is delivered at 22/12/18, we estimate the average fuel saving
could be as much as 3 per cent over the life of the vehicle.

The benefit of using
clean fuel in modern mining machinery is significant, added to BP’s fuel
technology experts.

BP recently undertook
a field trial with a large iron-ore mine in Western Australia, testing the
effects of clean fuel on the engines of Caterpillar 793C dump trucks.

After tests running
for more than 6000 hours they observed a more than five per cent increase in
power, 2.6 per cent improvement in fuel efficiency and considerable reductions
in carcinogenic particulates and CO2 emissions when using clean fuel.

The mine valued this
improved productivity and engine durability in the tens of millions of dollars.

BP Global Mining
Technology Manager John Appleyard was an integral member of the project team
and explained why the company had invested heavily in a clean fuels project.

“Achieving fuel
cleanliness onsite is a difficult task,” he said.

“We wanted to help our
customers keep fuel clean because it substantially improves fuel efficiency.

“The Fuel Integrity
and Technology (FIT) program is a comprehensive clean fuels strategy that can
be personalised to any business in the mining industry.”

The education of
workers onsite is important in preventing fuel contamination because they are
directly involved in the storage and handling.

Trial participants were
also welcomed the fact that BP’s clean fuel program included an interactive
training module that could be accessed online, took less than an hour and
delivered the best-in-class fuel education for supervisors and operators.

Appleyard said BP
provided greater access to its global fuel technology experts.

“Our mobile team
conducts site assessments and audits on fuel facilities,” he said.

“We use the results
from these studies to provide personalised advice so our customers can prevent
fuel contamination onsite.”

The FIT program launch
is supported by the continued rollout of ultimate diesel across the country,
highlighted by a new supply point at the updated BP terminal in Gladstone.

Caltex to launch new diesel fuel products

Caltex is launching new Australian-developed diesel products in to the Hunter Valley mining region.

It comes on the back of Caltex upgrade its Newcastle terminal, which has “enabled customers access to new fuel products that would help address a number of maintenance and performance challenges known to be contributing to higher costs of maintaining their diesel fleets,” the company said.

According to Caltex general manger marketing Bruce Rosengarten, the new packages are focused on boosting engine power output and reducing fuel consumption.

“Caltex has responded to these challenges by introducing the Caltex Tec Diesel Advantage, a package that includes three new advanced diesel products along wit fuel filtering processes, site-specific engineering solutions, and a fuel saving low viscosity engine oil,” Rosengarten said.

Independent tests, carried out by Orbital Corporation and designed to replicate Australian conditions, showed the packages provided increased power output and fuel economy savings through improvements to injector cleanliness, he added.

In addition to this a new diesel filtration system has been installed at the Newcastle terminal to remove more microscopic abrasive contamination compared to conventional diesel fuel alone.


Caltex kicks off $200m Roy Hill diesel contract

Caltex has begun supplying on site diesel as part of its $200 million contract wit the Roy Hill iron ore mine.

The two year contract will see “Caltex supplying about 120 million litres of diesel to Roy Hill over the course of the contract to meet all the mine’s fuel needs during this important start-up phase and as production is expanded,” Caltex’s national manager business to business sales, Phil Amos, said.

“We recently commissioned on site fuel storage infrastructure at Roy Hill as part of our commitment to manage all of the mine’s diesel requirements,” he said.

“Deploying a fleet of four dedicated road trains, we will transport diesel about 400 kilometres by road from Caltex’s 40 million litre storage terminal at Port Hedland to facilities at the Roy Hill mine.”

The terminal is one of 12 operated by Caltex nationally.

The fuel will  be used for trucks and power generation on site.

Caltex will also supply the diesel powered locomotives that will haul the iron ore from Roy Hill to Port Hedland.

Cost increases could kill businesses, says Brisbane sign company

Rodney
Smith, managing director of fourth-generation, Brisbane-based signage company
Albert Smith Group, has said the further cost increases could ruin many in the
industry.

Smith, who spoke to the Courier Mail after yesterday’s PMI results showed the sector
remained in contraction, said life would be “even more stretched” with
electricity cost hikes added to fuel increases.

The federal budget last month included plans to increase the fuel excise – which has
remained at 38.1 cents a litre since 2001 – twice a year in line with
inflation.

“Logistics is a
major cost in Australia,” he told the Courier Mail.

“A container
from Shanghai delivered to my door is arguably cheaper than I can send a truck
to Melbourne.”

Smith added that
a wage increase could “deal a fatal blow to the many already struggling
manufacturing companies out there.”

Albert Smith Group traces its beginnings back to 1873 and founder Samuel Smith, to whom
Rodney Smith and sales director Mitchell Smith are great grandsons.

The company makes, installs, designs and maintains signs.

Image: www.albertsmithsigns.com.au

Toll wins $250 million Shell contract

Toll has won a contract that will see it provide a range of transportation services for oil and gas giant, Shell.

The five year-deal, worth $250 million, involved the delivery of fuel to service stations across Queensland, New South Wales, Victoria, South Australia and Western Australia.

It means Toll will deliver both fuel and lubricants interstate.

Toll Liquids general manager Time Kehoe said the new contract builds on the strong relationship between the two companies.

“We are really pleased to be expanding our business with Shell,” Kehoe said.

“This contract supports our fuel distribution strategy perfectly and further confirms Toll’s commitment to sustainable investment in the sector.”

It is expected contracts will be finalised in the coming weeks.

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