Big Picture

Declining Domestic Refining Capacity in Australia

Australia’s Oil Vulnerability – The Key Trends

Yesterday I looked at Australia’s decline in oil self-sufficiency, a trend that is set to continue into the future. Today, it’s time to look at another significant trend likely to affect Australia’s oil vulnerability: the decline in domestic refining capacity.

2. Declining Domestic Refining Capacity in Australia

The majority of Australia’s refining capacity is located close to the major consumption markets on the east coast. Crude oil feedstock for these refineries comes in part from domestic oil produced in the Bass Strait, but mostly from increasing quantities of imports.

Australia’s six refineries are small compared to the larger, more efficient refineries being established in the Asian region, resulting in increased competitive pressures on refining operations in Australia. This competitive disadvantage has resulted in the decision by some operators to close certain facilities and convert them to oil product import terminals.

Australian Refineries

Figure 1: Liquid fuel infrastructure in Australia.

Shell shut down the Clyde refinery, located near Sydney, in late 2012 and sold its Geelong refinery to Vitol in 2014. Additional planned closures of Australian refineries include Caltex’s Kurnell refinery by mid-2014 and BPs Bulwer Island refinery in mid-2015. Once the closures are complete, Australia will be left with only four refineries, equating to a reduction in domestic refining capacity of 42 per cent since 2011. Any further rationalisation of domestic refinery capacity will further increase the proportion of refined products sourced from overseas.

Concerns have been raised that the reduction in Australia’s domestic refinery capacity could negatively impact on domestic energy security. A report from Australian Strategic Policy Institute (ASPI) contends that closure of domestic refineries removes Australia’s ‘capacity to divert oil exports to domestic consumption in the event of a disruption.’ The NRMA’s latest report on Australia’s Liquid Fuel Security also suggests that Australia would ‘no longer have any liquid fuel supplies that could be considered secure, and … would lose the option to resurrect some or all of [its] local liquid fuel supply chain as part of a solution to a crisis.’

The Age queried:

‘With dwindling refining capacity, how would Australia cope if petrol supplies were suddenly cut off by a war, natural disaster or other catastrophe?’

In 2012, Department of Resources, Energy and Tourism (DRET) commissioned the National Energy Security Assessment (NESA) Competitive Pressures on Domestic Refining report to consider the energy security implications of having less refineries operating in Australia. It concluded that despite the closures, ‘supply chain diversity and flexibility is retained which provides continued security of supply. Only in the unlikely scenario of no refining sector coupled with a failure of physical oil markets does Australia lose the flexibility to redirect and refine some crude oil.’

Similarly, the House of Representatives 2013 report on Australia’s oil refinery industry suggests that ‘the changes in domestic refining capacity to date will not impact on Australia meeting its liquid fuel requirements. There are reliable, mature and highly diversified international fuel supply chains, which provide Australia with economic security.’ The Daily Reckoning Australia asked:

‘Would you be paranoid for arguing that a country should not trust its energy security to foreign trade?’

 

Australia’s Declining Oil Self Sufficiency

Australia’s Oil Vulnerability – The Key Trends

As the world enters the Peak Oil era, it’s important to identify some of the trends which contribute to Australia’s oil vulnerability. Significant risks to Australia’s liquid fuel security currently exist and it is possible to identify future trends which will see this fuel security decline even further.

Let’s take a look at what some of the current oil vulnerabilities are for Australia and then examine what this could mean in the future, when oil depletion begins in earnest.

1. Australia’s Declining Oil Self Sufficiency

In absolute terms, Australia is largely self‑sufficient in the coal and gas needed to provide energy to its economy and society. However, the same cannot be said for oil and petroleum products which account for 34 per cent of total energy consumed in Australia and 97 per cent of the vital transportation sector.

Australia’s oil production peaked in the year 2000 and has declined overall since then (figure 1). Liquid fuels production will continue to decline because production from new domestic projects has not been able to offset declines from currently producing fields.

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Figure 1: Actual (blue) and predicted (red) Australian crude oil production

While Australia’s oil production is already in decline, national consumption has risen steadily by around 20 per cent over the past decade. Australia is a net importer of both crude oil and petroleum products (Figure 2) and the trend towards increasing net imports is set to continue in the coming decades.

Australia oil_production_consumption

Figure 2: Australia’s total oil production and consumption (1992-2014)

Net imports currently account for about 60 per cent of Australia’s consumption, however Australia’s oil self-sufficiency is actually far less than the remaining 40 per cent would suggest. The Carnarvon Basin off Northwest Australia accounts for 72 per cent of total Australian liquids production. Most of this bounty is exported due to the lack of regional refining capacity, the proximity to Asian markets and the ability to demand premium prices for the light, sweet grade of oil produced in the region. Subsequently, the country’s North and Northwest regions completely rely on imports of refined liquid fuel products.

Presently, only 17 per cent of the feedstock used in domestic refineries comes from domestic crude oil, down from 37 per cent a decade ago. Figure 3 illustrates just how little of Australia’s indigenous crude oil is refined into products that meet the end needs of Australia’s citizens and industries.

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Figure 3: Australian liquid fuels supply and usage.

The Australia Senate noted in 2007 that:

‘Australia’s self-sufficiency in oil is expected to decline into the long term as reserves are depleted and because of rising demand.’

 

What’s Really Up With This Business in Libya?

It seems like the world has turned upside down since the beginning of the year. I’m trying to make sense of it all, so I plan to spend a bit of time over the next few weeks discussing the big events; what may have led to them and what might be the outcome. First up….let’s talk about Libya.

When the West decided to intervene in Libya my first thought was, “Of course…Libya has oil”. After all, plenty of humanitarian crises are occurring in other parts of the world and yet they are left alone to sort their own problems out. Oil makes Libya a special case.

However, from politicians and talking heads on TV I was hearing that this was not about oil, because Libya only has about two per cent of the world’s oil production. They claim that they were going into Libya because they had learned their lesson in the 90’s and didn’t want another Kosovo on their hands. Two percent is supposedly nothing in the global oil supply….a mere blip, which the global economy could care less about.

And yet, Libya is a big deal. Why is it that a potential loss of only two per cent of the world’s oil production is cause for expending huge amounts of money launching air strikes against Col Gaddafi’s regime? (With warheads containing depleted uranium no less…. but that’s a whole other story)

When we look at the percentage of European oil imports that come from Libya, the story becomes a lot clearer. More than half a dozen European nations rely on Libyan oil for more than 10 per cent of their oil imports. This then is one obvious reason for the West’s intervention in Libya. Industrialised economies cannot afford to lose access to 10-23 per cent of their oil imports.

Source

But given the relatively small quantity of oil passing from Libya to North America, why is the US so heavily involved? Is it just a matter of the US helping out its NATO allies or is there more to this than meets the eye?

Dr. Paul Craig Roberts, former assistant secretary of US Treasury provides some insight on the revolution in Libya in a recent interview. He states:

In my opinion, what this is about is to eliminate China from the Mediterranean.  China has extensive energy investments and construction investments in Libya.  They are looking to Africa as a future energy source.

The US is countering this by organizing the United States African Command (USAC), which Qaddafi refused to join.

[…]

In my opinion, what is going on is comparable to what the US and Britain did to Japan in the 1930s. When they cut Japan off from oil, from rubber, from minerals like ore; that was the origin of World War II in the pacific. And now the Americans and the British are doing the same thing to China.

The geopolitics of oil is a very interesting subject and occurs very much outside of the spotlight of the mainstream media. It is my opinion that the great world powers are fully aware of the oil shortages upon our doorstep and are manoeuvering to control access to the remaining deposits of conventional oil. What concerns me is how this might play out. What we are now seeing in Libya could be the beginnings of the 21st century’s first great war.

The other interesting story surrounding Libyan oil is that Saudi Arabia pledged to raise production to offset the decline from Libya, and yet Saudi Arabian production remains flat. Could this be an indication that the kingdom actually no longer has the spare capacity to meet the global demand for oil? From the Daily Reckoning:

For better or worse, most of the “spare capacity” burden falls on Saudi Arabia. Saudi princes claim to be able to goose production from 9 million barrels a day to 12 at the drop of a hat.

Never mind that they’ve never done anything like that before, even when oil ran up from $25 to $147 a barrel between 2003-08. The official line – and, therefore, the oil market – still believes it’s true.

Bottom line: “Saudi Arabia can’t make the shortfall from Libyan supplies,” says commodities investing legend and Vancouver veteran Jim Rogers. “They’ve said in the past that they can increase production, but they can’t.”

To me, this is just one more indication that we are very close to, or past the peak in global oil production. If a loss of two per cent of the world’s oil supply cannot be made up by OPEC’s ‘swing producer’, and is cause for military posturing, then surely we are in a desperate place indeed.

What we hear from the media is that this latest run up in prices at the fuel pump is simply a result of speculators and freaked out investors, coupled with typical Easter long weekend price hikes. What they are missing is that the end of cheap oil is here. We have now entered a world of highly volatile liquid fuel prices, and just about anything could happen. Oil production can no longer keep pace with demand and desperate times call for desperate measures. Hold onto your hats, we could be in for a wild ride.

Fire Alarms

Brendan and I are well trained to respond to fire alarms. I won’t speak for Brendan, but my experience started in earnest during my four years at University. I shared a building with 47 other people, and my building was directly adjacent to many others just like it. During exam time, we inevitably had people up at all hours studying and making toast….or rather burning toast. This resulted in spending many hours in the parking lot wrapped in a doona (comforter) and waiting for the fire department to arrive and declare the building safe.

Years later, Brendan and I were backpacking through Tasmania, Australia and one night our Devonport Hostel caught on fire. We evacuated, waited a few hours until the fire was contained and then slept in a room reeking of smoke. Obviously we moved on the next morning, but a few days later we saw in the news that the same hostel had caught fire again and this time, people had died.

A few nights ago in Sarlat, France we were awoken at 1am to a shrieking fire alarm. We quickly got up, dressed, grabbed our essential belongings and headed out into the street. One other hotel guest was outside in the freezing cold with us. No fire department turned up. No hotel manager. Just us…and one other guy. After about ten minutes the alarm switched off, we all looked at each other, shrugged shoulders and went back to bed.

We’ve learnt from experience that although 99% of fire alarms are nothing to worry about, every now and then, responding appropriately could save your life. This evening, after a decent sized carafe of good French ‘vin blanc’ I’m being a little introspective. I realise that I approach life the same way I approach fire alarms. If I see warning signs I respond, even if it means that 99% of the time it was for nothing. Surviving that 1% is the key.

Photo by: L.C. Nottaasen

Saying ‘Goodbye’ to America: Part 1

 

It’s been a long time since I’ve written a post on this here blog. The main reason is that I’ve been doing a lot of thinking. Sometimes writing helps my thinking, but recently thinking has been getting in the way of writing.

With five months to go until we leave the US and head back to Australia, I think I’m starting the process of saying goodbye to our home of the last few years. Everywhere we go now we take special notice of all the things we’ve loved about this country. On the flipside, all the things we’ve disliked have amplified recently and are driving us nuts. I thought it might be cathartic to start writing all these thoughts down.

  • I’m really going to miss where we live. We can walk to the shops, restaurants, brewery and cafes in about 5 minutes. I can ride to work in 10. We can ride to the library, bookshop, concerts in the park and most of our friends in 10 minutes. We can catch a ferry to the city and it only takes 15 minutes and is a lovely relaxing way to enjoy the evening or a sunny afternoon.
  • I’m going to miss all the fantastic events available here. Free local classes on gardening, bee-keeping, fermenting. Getting to sit in on lectures by people I found on the internet: Chris Martenson (The Crash Course) and Annie Leonard (The Story of Stuff). There is never any shortage of interesting things going on here. I worry that Australia is going to feel very ‘small’ in comparison. 
  • I’m going to miss the house we live in. It’s an older house on very little land, but it has three very mature orange trees and a dwarf apple tree. We’ve dug up the weeds surrounding the front courtyard, improved the soil with homegrown compost and now have a small but thriving vege patch. I’m going to miss that.
  • I’m going to miss morning walks along the Bay. I’ll miss seeing the ducklings grow up every year. I’ll miss the supersized seagulls which we don’t have in Australia.
  • I’ll miss the insects and birds that have now made a home in our garden. The bees, the hummingbirds, the Black Phoebe, even the caterpillars.
  • I’ll miss the people I work with. I work in an international office which means I make friends with people from all over the world. We also have some great parties. When the Spanish won the World Cup Final, we celebrate with fresh crunchy bread, salami, cheese, olive oil and Spanish Wine. For Bastille Day tomorrow, we are partaking in Croissants for breakfast. For Australia Day we have a huge BBQ with 300 of our closest friends! Canada Day: It’s Maple Syrup, Ice Wine and Moose Milk. Any Mexican holiday sees us eating tortillas and drinking tequila. And on and on it goes. With so many different countries represented here, we always have something to celebrate.
  • In general, Americans seem to be much ‘nicer’ than Australians. To your face at least, most Americans will be polite and friendly and will at least feign some interest in where you are from. I’ve become accustomed to people here commenting on your clothes, haircut etc and every now and then saying how nice you look. I don’t remember that ever happening in Australia…except maybe my wedding day and that was mandatory for all attending. 

 

  • On the other hand, I’ve found that Americans are not necessarily very genuine with their feelings. It takes a long time to get beneath the veneer. Australian’s generally are fairly honest about that sort of thing (sometimes painfully so), so I initially found it difficult to adjust to the difference in culture. I had an American friend who was clearly (to me) having a very bad day, but she painted on a smile and everyone around her chose to believe it. It’s a little weird and to be honest it makes it hard to believe people when they say anything to you. In general, ‘let’s catch up’ does not mean there will be any effort made. ‘Party starts at 6pm’ means that people will arrive between 6:30 and 7pm. Most Americans will leave soon after desert is served (usually by 10pm), while the Australians, Canadians, Spanish and Finnish will still be there at 2am. It took some time work out that this is not personal and to not be offended by it.
  • The sheer amount of waste here is heartbreaking. Lawns are watered every day (we live in the desert) and most of the time the sidewalk and street are liberally watered as well. People leave the hose running down the gutter while washing the car. The amount of trash is incompressible. The garbage bins (trash cans) in our street are easily six times the size of what we had in Australia and are often overflowing with waste. People here at work will use Styrofoam plates and plastic forks for lunch, even though I brought in real plates and cutlery for everyone to use. It does my head in.
  • I’m flabbergasted at the size of the SUV’s around here; usually with one passenger. Hummers. ‘Nuff said.
  • The bureaucracy here is unbelievable. Forms are lengthy and not intuitive. The banking system is archaic by western standards (although getting better). Telecommunications companies are frustrating to deal with. Anything that involves the Government seems to take forever and never works easily. Some days I seriously want to scream at the ineptitude. Lately, I just have to laugh and shake my head instead. Otherwise I’ll go crazy.
  • Important mail goes missing about 50% of the time. Unacceptable.

Anyway, that’s probably enough sharing for today. I’ll probably revisit this theme on occasion during the next five months.

Photo by: Der Ohlsen

Australia’s first female Prime Minister

Photo from news.com.au

Thank goodness for live steaming TV on the internet. I’ve been glued to the Australian news all afternoon, waiting to see if Australia was going to get it’s first female Prime Minister. Sure enough, we did. Julia Gillard was sworn into office sometime after noon local time and is now attending her first question time in Parliament.

They don’t lie when they say things move fast in politics. I first got wind on Facebook this morning that something was up with the leadership of Australia. In less than twelve hours we have history in the making. A female Monarch, female Governor General and female Prime Minister. I certainly wasn’t expecting that in my lifetime.

After the excitement of today’s politics it will be interesting to see what happens in the coming weeks and months. It seems that Kevin Rudd lost the leadership because the Australian people weren’t happy with the way he handled his promises to tackle climate change and the mining ‘super tax’. Will Julia be able to turn it around in time for the next election due within six months?

Aussie politics just got interesting. I suppose I better enroll to vote.

On Building Lifeboats #2

On my last post On Building Lifeboats, there was a comment that I wanted to address, and then my reply became so long I figured I’d just make a new post.

More gloom and doom.

Sorry, but I just don’t buy it. And I don’t think the way to convince people that change is needed is to tell them that it’s TEOTWAWKI.

Change is absolutely needed, but change can be incredibly positive, uplifting and creative. It can also be empowering.

I am NOT going to sit on my butt and let the world fall apart around me. But I am also not going to let any single one of my neighbours suffer while I have the ability to change it. I believe that when we must, and we will, we will work together as communities and countries to solve our problems. And it will be harder in some places than others. But we’ll get through it together – not by building lifeboats for a few.

Sorry if this sounded like a rant. But I just don’t buy another End Of The World scenario. We create our own realities – and the reality I’m creating is one of organic food, open spaces, and equality for those around.

No lifeboats. And definitely no self-appointed captains cashing in on people’s fear. Just community

Rant over

I certainly do not consider ‘lifeboat building’ to be about getting myself prepared for what’s coming and leaving everyone else to drown. That is not how I think. I am all about community. There is no way we are going to be able to transition on our own. However, at this point in time, I believe our efforts are best spent on the people who want our help now. Once we get that critical mass moving, more people will become aware and then we will have more people to help them through it. We are starting a movement from the grassroots and have to build it up from the small group of people who currently see what’s really going on in the world. Unfortunately we cannot waste our precious time trying to convince every single person that they need to change the way they live. We just need to get on with ‘Being the Change we want to see in the world.’

Sorry if this sounded like a rant. But I just don’t buy another End Of The World scenario. We create our own realities – and the reality I’m creating is one of organic food, open spaces, and equality for those around.”

You are very lucky that you are making your transition a reality already. You are in an ideal place for it where you have a smallish community living in an area with abundant food and water resources. Not everyone will be in such a position.

I currently live in Southern California. There are millions and millions of people living here in the desert where all water is pumped in from the north. We are already beginning to see the effects of climate change and peak oil on Southern California’s water supply. The water to the farmers has been switched off. This region used to be the fruit and vege basket for North America and now it’s becoming a dust bowl. Watch some old movies of the dust bowl of the Great Depression. That’s what we are starting to see here in California.

The economy here is collapsing. Real unemployment in many counties is up around 25%. Nearly 50% for the youth. You’ve seen Greece on the TV. California (the world’s 8th largest economy) is in a worse position, but the majority of the people haven’t yet realised it. Quietly, over 1 million people have already left the state. The Government is trying to impose a massive ‘departure tax’ on people before they leave to stop all the money disappearing from the economy.

Mexico is less than 30 miles from where I live. The Mexican Government is heavily reliant on the proceeds from oil sales for their social services. Mexico’s oil exports are collapsing. The drug cartels are taking over. In the border town less than 30 miles from my home, over 600 people were killed in drug related violence last year. That violence is already spilling over into California. What happens when millions and millions of Mexicans decide they want to escape the violence down there?

We are already seeing anti-immigration uprisings in Arizona and Texas and there is state level conflict over the issue. California threatened to boycott Arizona over their anti-illegal-immigration stance. Arizona basically said, “Go ahead, 25% of your electricity comes from Arizona. Good luck with that.”

Things here ARE doom and gloom. Plenty of the places around the world ARE doom and gloom. It’s already here for many people. We won’t all be living in ideal locations with open spaces and abundant food and water as these systems collapse. There are simply too many people on this planet for everyone to get to live like that. I don’t think there is any way to sugar coat that fact.

Change is absolutely needed, but change can be incredibly positive, uplifting and creative. It can also be empowering.”

I agree that we need a positive message to inspire people to change their way of life voluntarily. A voluntary transition to a low energy lifestyle is preferred. When I talk to people I talk mostly about living simply, enjoying nature, growing food, walking lightly on this earth and spending time with family and friends rather than in front of the TV or at the mall.

No lifeboats. And definitely no self-appointed captains cashing in on people’s fear. Just community.”

We must build lifeboats. We must gather people around us to help. We must encourage others to see the benefits of lifeboat building and then show them how it is done. I don’t believe I’m cashing in on people’s fear. I don’t believe I’m being arrogant or appointing myself as captain…choosing who gets to climb aboard. That’s not what I’m saying.

I’m saying that life as we currently know it is going to change a lot in the next few decades. Some places will be affected more than others. It’s time to stop drinking at the bar, and start building lifeboats. I am willing to help anyone who wants to learn how.

I just wanted to finish by saying I really do appreciate all the comments I get on the blog. We don’t all need to agree on everything. That would be boring and we all need our own beliefs challenged regularly to ensure that we haven’t just latched onto an idea without thinking it through.

Leanne. Thanks for your comment. I hope you don’t mind me addressing it in this way. Your life in New Zealand is beautiful and inspiring. I would love to be living on your lovely property. I aspire to having our own piece of land in a small community one day.

On Building Lifeboats

Power went out at work yesterday and the computer servers are still down today. I’m not sure how many people have been affected by this. It’s certainly hundreds, maybe thousands. There has been so much lost productivity this year due to such events. I don’t bother complaining about how the systems seem to be becoming less reliable. It’s obvious why it’s happening. Everyone is too broke to be repairing stuff that needs to be repaired. This is only going to get worse, so it’s best to start accepting that this as an inevitable part of life from now on. We have to start building our lifeboats.

The concept of lifeboat building comes from Michael Ruppert’s brilliant documentary Collapse.

Imagine for a moment that you are on the Titanic and it’s already hit the iceberg. You realise that there aren’t enough lifeboats for everyone. With fortuitous luck, you also know how to build lifeboats.

There are also three types of passengers aboard the Titanic. You have the people who see that there is a problem and want to learn how to build lifeboats. You have people who are in a state of shock. They are either immobilized by fear or are panicking. Then you have the people who believe that the Titanic is unsinkable (for that’s what they’ve been told) and would rather go back to the bar and enjoy the dancing.

The question then is: Which group of passengers are you going to spend your precious time to help?

Whenever I get frustrated about the people who don’t ‘get it’, I remind myself of this story of the passengers on the Titanic and lifeboat building. I now focus my energy on people who are interested in understanding what’s going on in the world, those who see that something is not quite right. I don’t bother discussing such issues with people who are clearly heavily invested in the old paradigm. Sometimes it’s really hard, especially when they are family and friends.

If you haven’t already seen the documentary Collapse, then I encourage you to watch it. It’s brilliant.

Michael Ruppert has also just launched the Collapse Network. He’s trying to assist in Lifeboat building and helping like-minded people find each other. Even though it’s only just launched, you can already see how many people are already on ‘the map’ (including the skills they are willing to share).

Photo by: schoeband