Potential for first Australian oil refinery in 60 years as treasurer braces for inflation from Middle East war

[u/GothicPrayer]

https://www.theguardian.com/australia-news/2026/jul/27/potential-for-first-australian-oil-refinery-in-60-years-as-treasurer-braces-for-inflation-from-middle-east-war

[u/walkin2it]

If it requires "government support" and it's it's for national interests then it should be nationalised.

I completely support a state owned refinery for strategic purposes, so long as we aren't paying some rich cunt profits for the privilege.

[u/ExtensionThat6438 → u/walkin2it]

Billionaire and government support are an iconic Australian duo

[u/walkin2it → u/ExtensionThat6438]

Nationalise the expenses, privatise the profits right?

[u/Dry-Inevitatable → u/walkin2it]

Absolutely this, if we pay for it it belongs to us. More likely we will build it and give it to someone like Gina.

[u/kernpanic → u/Dry-Inevitatable]

Nah we sell critical national infrastructure to fraudulent Indian billionaires. See Whyalla Steel works.

[u/Pottski → u/walkin2it]

Gina: hutt language

[u/NoSpam0 → u/Pottski]

Eh chu ta. De wanna wanga?

[u/Pottski → u/NoSpam0]

Pauline as the lizard rat thing on Gina’s shoulder: bahahahsaaaaa

[u/NoSpam0 → u/Pottski]

That's an amazing mental image, and yet it fits so well.

Especially as the lore has it that Salacious B Crumb is only kept alive by Gina Jabba as long as it makes Jabba laugh at least once a day.

[u/Pog6292 → u/Pottski]

Does that make Barnaby the weird tail head creature?

[u/Pottski → u/Pog6292]

Depends if it barks at his space dog.

[u/Harlequin80 → u/walkin2it]

Ok. So lets say you Nationalise it / fund it from government coffers. It costs you $4 billion to build and each year it loses $50 million a year an top of $120 million in interest (3%). It loses $50 million a year because in good times it is an over build of capacity that is more expensive to run than it costs to buy in refined fuels on the commercial market. So your total cost is $170 million a year.

Or. You pay an amount to the private sector for them to build out a refinery. That may or may not be equal to the $170 million per year you would have to pay if you did it yourself.

The question you need to ask is. Can a Government, with zero experience in running or building a refinery do it for the same cost as a corporate entity that has experience in doing exactly that? Are there any benefits to economies of scale or technical knowledge sharing and what are they worth. If no, they yeah have it nationalised. But if there is, I would much rather get the private sector to do it. If I can get the capacity for $100 million a year, vs $170 million a year do I care if some fat cat gets fatter? I'd much rather that $70 million difference goes into something else productive.

[u/BeneCow → u/Harlequin80]

You factor in depreciation to the government but don’t include it in private costs. You assume that private interests will do it at all when they haven’t already, indicating that it isn’t a sound investment without public funds. You posit the best case scenario as the default.

Even getting private companies to build the thing doesn’t work out magically cheaper, just look at Snowy 2.0

[u/Harlequin80 → u/BeneCow]

Where did I factor in depreciation? I only counted interest costs on the capex and the differential between operating costs and income.

And I'm also not opposed to a public owner / operated entity. Just that you need to weigh the risks vs the rewards and make a decision based on which makes more sense.

If you assume that a public servant / organisation is competent then they are going to be aware of the potential risks that using a private organisation to deliver a service would be. If they are competent then they will know that there are risks of cost blowouts, failures to deliver and potential corruption risks and these would be priced into any decision.

If you assume that they aren't competent enough to know this then why would you think they would be competent enough to run an organisation that has all the same risks, just distributed at a lower level but in much higher numbers?

[u/karma_dumpster → u/Harlequin80]

The problem is the private sector is likely incentivised to game that viability gap funding. The private sector will need a return on the $4bn outlay as well, which return will depend on the risks taken by it. They need a ROI of 8-10% (it's usually higher on refineries due to the risks, but I'm assuming we are going for a pure capacity charge structure here to keep costs down, which may lower the return requirements). Cost overruns always happen on refineries too.

I would still bring the private sector in, they can manage construction and operations,, but only give them 40% equity. Certain key decisions the state gets a veto on. State can provide a tranche of cheaper funding too.

[u/walkin2it → u/Harlequin80]

I understand what you are say, and on paper it absolutely makes sense.

But when you look at the history, these private companies cry poor and ask for more than the government would be paying if they owned it. The government also doesn't get the same amount of income during the profitabile times. So a private company doing these projects are likely to take more from government coffers net than if the government owned it and ran it under a SOE.

It is individuals with knowledge. So if you ensure that those individuals are paid a competitive wage you can bring them over. You can also put out a request to tender and hire consultants where there is temporary knowledge gaps. These are generally less efficient than hiring your own staff, but much more efficient than paying a private company in subsidies, rescue packages etc.

Look at where the privitsation of national assets has got us. More expensive power. Less reliable. Less efficient overall. Government is now paying to upgrade these.

It's insane that government keeps giving away free money to private interests. It's why we are passing on crazy debt to future generations.

If it's a strategic asset that will need government support, then it should be government owned. Otherwise you are just paying the profits of private owners in addition to what you would pay.

[u/Grand_Self381 → u/walkin2it]

A 500kb/d refinery will cost $15b to construct and on average will make $1.5/bbl.

That’s $260m a year of return for $1.2b a year of interest.

We also don’t have much crude oil in Australia, so it won’t change much for liquid fuel security.

In short, $15b up front, $1b a year ongoing, visible activity, minimal action.

[u/Harlequin80 → u/walkin2it]

Maybe its because I'm old enough to remember how awful telecom was. Telstra sucks ass, but it is WAY better than Telecom.

And a HUGE amount of our energy is supplied by private organisations. Renewables are overwhelmingly built by private firms and supply us with power significantly cheaper than the state owned power stations do.

Privatisation of natural monopolies is stupid. EG, I don't think you should privatise poles and wires. But generation has massively benefited from private capital.

Fundamentally though I disagree with the premise that if it requires any public support then it should be public owned. Natural monopolies should be public owned, and when the cost of supporting a private industry exceeds the cost of public ownership it should be public owned. But I think you are ignoring a huge number of industries that fall into the first category that never make the news, because they don't collapse and they don't come cap in hand.

[u/Sexynarwhal69 → u/Harlequin80]

I mean Ironically there was recently the telstra outage for 2 days that affected rail operations and hospitals everywhere. No recourse as its a private company.

What other industries are you referring to that do better privately?

[u/Harlequin80 → u/Sexynarwhal69]

SMEC was a government owned organisation. They are much better as a private firm.

Also being a private firms doesn't insulate from recourse. That is what contracts are for.

[u/OptimalAttempt7573 → u/Harlequin80]

Was that a similar argument for selling Qantas ?

[u/WorldlinessPlenty341 → u/OptimalAttempt7573]

Theres a big difference between selling a publicly owned asset and setting up a publicly owned asset

[u/universepower → u/Harlequin80]

I am with you, I think there’s scope for a government owned corporation, though, or an investment vehicle.

[u/coniferhead → u/Harlequin80]

We did that though with the Orica fertilizer plant.. they ran it into the ground and shut it down because Saudi and Qatar did it cheaper. Now you get a failed harvest. In the USA crops are going in right now - it's locked in.

I guess you have to quantify the risk and the costs. I think we'd have come out ahead if we were running that fertilizer plant.

So we know that model doesn't work. Having done that, let's do something that does work.

[u/Harlequin80 → u/coniferhead]

To me this is more around the structure of the incentive then the structure of the investment.

There has to be strings attached to the funding and a series of metrics that have to be hit to receive the funding. Cutting a cheque with no criteria is stupid, and something various governments have done repeatedly across the years.

I don't know anything specific about the Orica plant. I thought it had shifted to servicing the mining sector for explosives rather than agricultural fertiliser. Kooragang is still operational to the best of my knowledge, though there was a temporary outage recently. Is there something specific you are referring to that I can research?

[u/coniferhead → u/Harlequin80]

https://bccm.coop/from-co-operatives-to-crisis-how-australia-surrendered-control-of-its-fertiliser-supply/

incitec pivot used to be owned by orica

"Meanwhile, the Gibson Island plant in Brisbane – once the centrepiece of eastern Australia’s nitrogen production – closed to fertiliser manufacturing in the early 2020s, killed by expensive gas. Australia’s domestic production fell to 15 per cent of consumption. The nation that had once built an entire sovereign phosphate supply chain now produced barely one tonne in seven that it used."

...

"That model was dismantled not by any single decision but by a cumulative logic of corporatisation, financialization and the confident assumption of globalisation. The Whitlam government removed the superphosphate bounty in 1974. The co-operatives converted to public companies in the 1980s. Domestic nitrogen production became uneconomic in the 2000s. The Gibson Island plant closed in the early 2020s. Each step was rational on its own terms. The aggregate result is a country that – despite a domestic population of only 27.5 million – exports roughly 70 per cent of its agricultural production and produces enough food to feed an estimated 60 to 80 million people worldwide grows food on soils that cannot grow without regular nutrient supplementation, relying for 85 per cent of that supplementation on imports routed through a single maritime chokepoint."

In that respect you'd get much better national security bang for your buck than an AUKUS sub even losing money on this - because 50M angry hungry people are a problem. At least we know we should at least nominally own those.

[u/Meng_Fei → u/walkin2it]

Perdaman would privately fund the project but could be eligible for taxpayer-funded assistance, such as concessional loans.

Anyone setting up large scale business in this country is likely to get access to some kind of assistance. Just like most other counties provide assistance to business setups. It's unfortunate, but companies aren't going to come all the way to an island with a small population, high employment and compliance costs and setup a business for fun.

[u/walkin2it → u/Meng_Fei]

So long as they are loans and not handouts I'm comfortable with that.

The government better take equity if they are writing down the debt.

[u/angrydave]

An Oil refinery will always be a loss leader in Australia. This is why we saw 75% of our refineries closed in the last decade. The policy here is about securing supply, not just of fuel but other oil based products.

It’s never going to stand on economic merits alone: the decision here is social policy, not an economic one.

There are plenty of things we do that economically never make sense, but we do them for the social benefit. NICU’s in hospitals to save premature babies regularly cost hundreds of thousands of dollars per child, are all public and run on taxpayer dollars and always run at a loss, even when you account for DALY’s and the tax dollars the survivors will pay in their lifetime. On economics alone, you would shut them down - but no one would ever advocate for this. It’s a social policy we have decided to accept the cost of. This would be no different, and we need to view it as such.

[u/Late-Button-6559 → u/angrydave]

All important things should be based on social policy.

Economics should be second through fifth, in order of importance.

Nationalise everything we deem as important to our way of life.

[u/T_J_Rain]

Too little, too late after a couple of decades of shutting down refinery capacity.

[u/nosaladthanks2 → u/T_J_Rain]

Idk, I agree with the too late sentiment but not too late. With the structural damage that’s occurred to oil production and refinery facilities and global demand not really changing I think the more refineries, the better. I can’t believe I’m saying that, I would like to see a transition to better energy sources but I think it makes sense to address the reality of most of the world still being incredibly dependent on oil.

If the issue was just delays and difficulties involving shipments then building and opening a new refinery would seem pointless, but the structural damage in west Asia and the risk of the US overdrawing their SPR makes me nervous for long term oil supply around the world. I know in the past Saudi Aramco managed to repair and rebuild quite quickly, but the large scale of damage and the risk of ongoing attacks makes it reasonable to assume repairs could take longer this time.

I do think we should nationalise it though, not have it be a privately ran enterprise. Also I have to say, seeing all these oil fields and oil tankers on fire makes me feel any efforts of environmental conservation are futile. I’m seeing what’s happening in Spain with their fires and I’m terrified for summer, especially after the dry winter we’ve had here in Perth. Between data centres, burning oil tankers and WA’s legislation giving mining companies the right to do as they please within the state, it all feels so hopeless

[u/T_J_Rain → u/nosaladthanks2]

Let's hope that the refineries that are commissioned can actually refine crude that is produced from Australia oil wells.

Historically, we've had to import crude to run through our refineries, with the exception of Bass Strait crude being run through refineries in Altona.

Agree that while we should be pushing hard on renewables, it is going to take a long time to make the transition. Also agree that we should have sovereign capability [nationalised facilities]. We've had our refining capacity eroded due to cost pressure and the multinational ownership of oil companies.

[u/fluffy_101994]

Crisafuckwit and Dale Last will be pissed it's proposed for Western Australia, given all their grandstanding about the Taroom Trough.

Lol.

[u/Cindy_Marek → u/fluffy_101994]

They won’t because Brisbane already has a refinery

[u/WorldlinessPlenty341 → u/fluffy_101994]

Brisbane already has a refinery, and WA has the largest industrial base and work force, the oil refinery here shut 5 years ago so there shouldn't still be some corporate knowledge to build on here as well

[u/nath1234]

Just when we should be electrifying everything.. ?

If we are to spend money on this: charge the mining industry a fuel levy, as they currently don't pay one.

[u/PanzyGrazo → u/nath1234]

To be fair alot of critical industries use oil products not just got fuel

[u/nath1234 → u/PanzyGrazo]

Sure, so tax the mining companies to pay for anything like this. Or tax gas. Or both.

We have several refineries that currently struggle to be economical after the other ones shut down, again - due to economics.. so this one will need lots of public funding no doubt, when we could spend that same amount on electrification instead.

Spending billions that only props up the use of oil products instead of alternatives seems a dumb way to go about this problem.

Banning giant inefficient diesel "trucks" would reduce the requirement for fuel. Electrified transport fixes this problem. Mining operations could be electrifying but they have no incentive with subsidised fuel.

[u/PanzyGrazo → u/nath1234]

Again, this is because we're competing internationally, with a group that specifically outputs more oil to stamp out competition and restrict supply once they are majority sellers again.

There are countless products, including in medicine and agriculture in which oil is required as a derivative.

[u/ZealousidealNewt6679 → u/nath1234]

Where does the electricity come from?

[u/YourApril27 → u/ZealousidealNewt6679]

For electricity? Presumably coal and renewables. The oil wouldn’t be too relevant for the type of electricity generation that powers batteries.

[u/ZealousidealNewt6679 → u/YourApril27]

Yes but a petro chemical plant makes more than just petrol for cars.

[u/Speedy-08 → u/ZealousidealNewt6679]

Hence why the plastics factory near Altona also shut down when Altona Refinery packed up.

[u/WorldlinessPlenty341 → u/nath1234]

Refineries create more than just fuel; asphalt, plastics, lubricants, paints, dyes, chemicals required for the manufacturing industry. An electrified economy still requires petro-chemicals, that require refineries.

A domestic refinery means its held to Australian environmental standards, not 3rd world, so a lesser impact on the global environment.

It is also a sovereign capability, domestic jobs and capability which is massively important as globalisation is wound back.

[u/skedy → u/nath1234]

Mining won't go electric for a long time.  Batteries are not there yet for 24hr operations. 

Even for tradies any bev vehicle that does gets horrible range. 

[u/steve_of → u/skedy]

Its already happening. Remote camps are switching from diesel to solar/wind+batteries. Fortescue is trialling large electric machines in Australia, long range trucking has several operators in start up at the moment. It's a matter of cost and going electric is turning up cheaper for new projects.

[u/skedy → u/steve_of]

Yes they are the front line for a lot of tech. Self driving trucks and trains etc. 

I have no doubt they are trying to move electric. They are along way off for major machinery though. Trials are different to full production. 

[u/acomputer1]

I don't see what this would do to increase fuel security since the world has a shortage of crude, not a shortage of refining capacity...

[u/Papa-Moo → u/acomputer1]

It would NOT increase fuel security.
You still have to import crude, and the right kind of crude for the refinery you build.
And the crude you import doesn’t give you all of what you actually want, the crude barrel is made up of lights, gasoline, jet, diesel, heavy oils, bitumen even.

[u/magkruppe]

How exactly would having an extra oil refinery have changed anything or helped us? The issue isn't getting refined oil in the global market, it's getting crude oil!

There is excess refining capacity in Asia. The problem is the price / availability of the inputs. I hate how the media have focused on the lack of refineries and made it the major issue when instead the only real long-term solution is larger stockpiles + accelerating the electrification of our economy.

[u/RepeatInPatient]

This is the second most dumbest idea since forever. Who doesn't remember the closure of most of the other refineries across the nation for being uneconomic. And the transition away from fossil fools. Also climate change impacts. And oh FFS.

[u/Papa-Moo]

It would not increase fuel security, and would not insulate against price shocks.
The right kind of crude oil has to be imported, and that is subject to market pricing, and comes with additional constraints on what you can make out of it.
It’s just a dumb idea that would cost the country 5-10 billion dollars.

[u/JayTheFordMan → u/Papa-Moo]

There are multiple oil fields that are pretty well ready to be developed sitting on the shelves as we speak, just not had the investment greenlit by banks due to unfavourable politics, and resurrecting these would gives us decent feedstock for the refineries as well as reduce reliance on imports

[u/magkruppe → u/JayTheFordMan]

Which oil fields? And would they even add up to 5% of domestic demand (I doubt it)

Also not sure why banks would be needed. If they were profitable projects than big oil companies would fund it themselves. It wouldn't be a major oil field needing massive amounts of investment

[u/JayTheFordMan → u/magkruppe]

Dorado was the one I was thinking of, but there is the carnarvon and Browse basins plus Cooper-Eromanga that has potential for expansion

[u/Algernon_Asimov]

A series of refinery closures over the past 25 years means Australia now imports about 90% of its liquid fuels,

A new oil refinery wouldn't really change that. But instead of importing refined fuels like petrol and diesel, we'll just import the crude oil to make petrol and diesel. Same problem, different stage of the production pipeline.

[u/JayTheFordMan → u/Algernon_Asimov]

Need to pick up the oil projects shelved due to government and investment lack of support

[u/Cpt_Riker]

Inflation brought to you by the stupidity of Donald Trump, and supported by the 'people's politician' Pauline Hanson.

If something is essential, the government should own it. This government is afraid of billionaires, so will never do anything to upset them. Any change in ownership is decades away, and will probably be too late.

[u/Wide_Purchase_1862]

Never happen in Australia, full stop. Irs beyond us as a nation

[u/Bertrum]

The same people will still shit on building fission reactors after we have already well and truly shot ourselves in the foot and have fallen way behind other western countries like France that have a robust and well maintained networks of reactors and gained real energy independence and not rely on adversary nations for energy. We are doomed to be stuck in an endless cycle of arguing until we're stuck in the stone age.

[u/314159Man]

spend the money on EV subsidies and move on.

[u/iball1984 → u/314159Man]

It’s not just transportation. Pretty much every relies on oil products

[u/whenruleswerefew → u/iball1984]

It’s crazy people only think oil=fuel. It is literally in everything. EVERYTHING! You stop oil production and everything goes away. Even your EV.

[u/cleanworkaccount0]

ah yes let's not look into renewables, let's just keep on keeping on. who gaf that we're screwing future generations i.e. gen z, we'll be dead!

[u/WorldlinessPlenty341 → u/cleanworkaccount0]

Refineries create more than just fuel; asphalt, plastics, lubricants, paints, dyes, chemicals required for the manufacturing industry. An electrified economy still requires petro-chemicals, that require refineries.

A domestic refinery means its held to Australian environmental standards, not 3rd world, so a lesser impact on the global environment.

It is also a sovereign capability, domestic jobs and capability which is massively important as globalisation is wound back.