Defene White Paper - Dependency on imports

www.abc.net.au/news/2016-02-24/fuel-imports-a-risk-amid-south-china-sea-tensions-nrma-advisor/7149648

Defence White Paper 2016: Dependency on fuel imports 'a risk' amid South China Sea tensions

With the Government expected to release its latest Defence White Paper on Thursday, an adviser to the country's largest motorist association has said he hopes tensions in the South China Sea have forced a re-think of where Australia gets its fuel.

Key points
•Australia heading towards 100 per cent fuel import dependency
•Essential services to stop 'within a week' of disrupted supply
•South China Sea tensions 'threaten' refined fuel imports

Retired Air Vice Marshall John Blackburn said Australia's food, water and medicine distribution was entirely reliant on transport fuel and the supply operated on a "just in time" philosophy for the sake of logistical efficiency.

Mr Blackburn, who is commissioned by the National Roads and Motorists' Association (NRMA) to provide consultancy and strategic advice on Australia's fuel security, said this unerring drive for market efficiency had led to four of the country's seven oil refineries closing down in three years.

"We're heading towards 100 per cent import dependency," Ret. Air Vice Marshall Blackburn said.

"But when the British were passing 40 per cent import dependency, they said they had a national security concern."

University of New South Wales Professor of International Security Alan Dupont agreed that Australia's growing dependency on imported fuel was "obviously a vulnerability".

"We don't have much in the way of refinery capacity in Australia right now and we don't have much in the way of strategic stock piles," he said.

"I think that dependency is only going to increase."

The South China Sea is a shipping route through which a large proportion of Australia's refined fuel is imported, including diesel, unleaded and jet fuel.

It is also emerging as a hot zone for potential conflict as China, the United States, Vietnam, Taiwan and the Philippines become increasingly invested in territorial disputes over islands in international waters.

Mr Blackburn said a scenario of conflict in the region and how it would affect Australia's fuel security was not considered in the Government's National Security assessment, "upon which the Energy White Paper (EWP) bases its assessment," Mr Blackburn said.

"The fundamental assumption they've made is because we haven't had a problem in 30 years, we're not going to have a problem."

With last year's EWP offering only brief discussion of the reliability of fuel imports, Mr Blackburn said he expected the Defence White Paper to look more "closely" at the issue.

Distribution of food, water and medicine 'would stop within days'

Engineers Australia (EA) told a 2015 Senate inquiry into the country's transport energy resilience and sustainability that Australia's total stockholding of oil and liquid fuel comprised two weeks of supply at sea, five to 12 days' supply at refineries, 10 days of refined stock at terminals and three days at service stations.

Australian fuel stockholding capability
•Chilled and frozen goods delivery - 7 days
•Dry goods - 9 days
•Retail pharmacy supplies - 7 days
•Hospital pharmacy supplies - 3 days
•Petrol stations - 3 days
National Roads and Motorists Association
The NRMA said Australia only retained enough fuel in stockholdings to continue delivery of chilled and frozen goods for seven days, dry goods for nine days, hospital pharmacy supplies for three days, retail pharmacy for seven days, and petrol stations for three days.

This left Australia well short of its requirement as a member of the International Energy Agency (IEA) to maintain 90 days of fuel in reserve.

Mr Blackburn said a significant disruption to refined fuel imports, "the vast majority of which comes from south-eastern Asia", would start to bring the country to its knees "within a week".

"What's important is what type of fuel you've got and where, because we can't move fuel around Australia readily," he said.


If you had a major interruption of fuel input, defence would grind to a halt very quickly because you can't do anything.

Retired Air Vice Marshall John Blackburn

"We can't move by rail anymore because we don't have the rolling stock. We don't own ships anymore. And the trucks that move fuel are designed for 'just in time' normal commercial deliveries."

The Australian Institute of Petroleum (AIP) said on its website that Australia sourced 85 per cent of its refined fuel from across Asia and 58 per cent of its crude oil and feedstock from the Asia Pacific.

Some 21 per cent of crude oil came from Africa and 13 per cent from the United Arab Emirates in the Middle East.

Petrol, diesel and aviation were the dominant transport fuels used in Australia and in 2012-13 accounted for 90 per cent of its transport energy use.

AIP maintains that with refined fuel coming from 20 different countries and crude oil from 17, Australia's supply is diverse and flexible enough to respond to any emergency in supply and had done for decades.

The Australian Government last year agreed "in-principle" to return the country to compliance with the IEA 90-day holding requirement.

Its plan to add 40 days worth of fuel reserves, expected to cost several billion dollars over 10 years, is promised later this year.

But Mr Blackburn, who retired as deputy chief of the Air Force in 2008, said escalating tensions in the South China Sea meant a significant supply disruption could be closer to reality than people think.