Geelong oil refinery fire will worsen fuel crisis, push up petrol prices, experts warn

A major fire at Viva Energy’s Coria oil refinery in Victoria could push petrol prices higher for motorists if supply cuts stoke the scramble for fuel in the middle of a wider crisis linked to the Middle East war.

On Thursday, Viva Energy’s chief executive Scott Wyatt said it was too early to know the size of upcoming petrol production cuts due to the blaze that 50 firefighters fought across Thursday.

Viva Energy operates and supplies 1287 service stations under the Reddy Express, Shell, On the Run (OTR), Liberty and Westside Petroleum brands. Its Geelong refinery, southwest of Melbourne, supplies around 50 per cent of Victoria’s fuel and 10 per cent of the nation’s.

“So if you put those two facts together, you’ve got reason to believe there could be a substantial supply impact for gasoline in Victoria, and I would think prices could go up. That’s the way it normally works,” said Geoff Trotter, the co-founder of fuel supply consultancy Fueltrac.

Mr Wyatt said the fire had affected two petrol production units across an area of around 30 square metres, after a suspected gas leak from a valve and subsequent explosion occurred late on Wednesday night. An estimated 40 to 50 workers were inside the Geelong facility at the time with no injuries reported. The company put its ASX-listed shares into a trading halt.

Prime Minister says impact unclear

Speaking in Malaysia on Thursday afternoon, Prime Minister Albanese said the scenes at the refinery were “very distressing”.

“For fuel supply clearly there will be consequences,” said Mr Albanese. “We will continue do what we can to make sure anything [fuel supply] offline is brought online as soon as possible.”

The Prime Minister also said Australia will receive an additional 100 million litres of diesel from Brunei and South Korea following deals agreed with both countries on Thursday.

Seek alternative supplies

Mr Wyatt told a press conference he was confident any supply shortfall from damage to the refinery could be filled by more overseas imports. “Yeah, no, we are. [confident],” he said. “I think obviously just said first and foremost, we need to make the site safe.”

The Viva boss declined to specify what percentage of supply could be cut from the refinery, or over what timeframe.

“Our priority is first and foremost for our people and keeping them safe and helping them recover from the experiences they had,” he said. “Yes, we have a very important role in continuing to supply the country. And you know the team have been absolutely committed to that and working incredibly hard to keep Victoria and the country in supply.”

Later on Thursday, Viva’s Executive General Manager for Energy and Infrastructure suggested the damaged processing units meant the refinery would lose a “little bit” of production, but “not a very large amount.”

Viva Energy operates a separate import terminal adjacent to its Coria refinery. Mr Trotter said how much refined product it could import by tankers from overseas as an alternative to lost production at Geelong is complicated by the shortfall from the Middle East already limiting supply. The refinery produces about 120,000 barrels of oil per day, and employs over 1,100 people.

AWU Victorian branch president Ross Kenna said the blaze appeared to have affected the refinery’s ‘mogas’ section, a key part of the fuel production process, meaning some loss of capacity was likely.

“This part of the plant, they send a lot of different fuel through to refine. So everything’s linked together. So different fuels create different fuels. This is a critical part of the refinery. So we do think it will reduce capacity,” he said.

On March 20, the Federal Government said it would extend its Fuel Security Services Payment (FSSP) programme to subsidise both Viva Energy and rival Ampol if refining becomes unprofitable due to rising costs to import unrefined fuel from overseas.

Shares in Ampol which operates Australia’s only other refinery in Lytton, Queenland, climbed 0.6 per cent to $33.34. Lytton supplies about 10 per cent of Australia’s transport fuel needs and about 40 per cent of Ampol’s customers.

“Against the background of what’s been happening in the Middle East, it’s highly unlikely any of these terminals are full,” said Mr Trotter.

“Diesel we’re already in a very tight supply environment at the moment worldwide and it applies in Australia where prices are $3.20 a litre. Viva’s disclosed the fire hit their gasoline unit so that’s also different grades of petrol that could be in shortfall impacted, so unleaded, Premium 95, and Premium 98.”

Energy Minister warns on “fast-moving situation”

Later on Thursday, Energy Minister Chris Bowen confirmed the “fast moving situation” would affect supply from one of Australia’s two remaining oil refineries.

“Diesel and jet fuel will be unaffected,” he told an afternoon press conference. “We’ll make further assessments on what the impact on petrol production will be. There will be some, but it won’t come to an end in Geelong. Viva is confident they’ll be able to replace the impacted petrol production with imports. But obviously there’s work to do in the coming days and damage to assess.”

The public should expect more updates from the government and Viva Energy over the weekend, Mr Bowen added.

“It will impact on production at this point, petrol rather than diesel and jet fuel. But we’re going to continue to really work closely with Viva, the company, and really monitor and work together on any impacts.”

Other fuel impacts

Other petrol and diesel suppliers to motorists include the 7/11 service stations that are almost wholly supplied by Mobil, which has an import terminal in Altona, Victoria, according to Mr Trotter.

United Petroleum’s 500 or so service stations across the nation are also supplied by an import terminal in Hastings, Victoria.

“For those companies that don’t have a refinery, some are involved in refinery exchange,” said Mr Trotter. “However most oil companies also have their own terminals in Victoria, they try and import gasoline and diesel into their own import terminals, most will have their own storage terminals.”

A spokesperson for Fire Victoria said the blaze is not considered suspicious.

Viva said it organised a community meeting at 6pm on Thursday evening in the local area to address any concerns of local residents.