COLUMN | Running on empty [The Boroscope]

STS operations on a Suezmax oil tanker. Photo: Martiam-2007/Wikipedia

What are a bunch of tankers doing anchored off Perth’s iconic Scarborough Beach? They’ve been out there for months. With my natural curiosity piqued, I started doing some snooping. It turns out they are doing ship-to-ship transfers (STS) of crude oil and petroleum products to a smaller shuttle tanker which then takes the cargoes down the channels to the BP Kwinana refinery.

At the time of writing there are two VLCCs, two of what look like Aframaxes and two product tankers. A mixture of Liberian, Panamanian and Malaysian flags (not that the flag state means much these days). So why are STSs being done off Perth all of a sudden?

Then the penny dropped. Australia has a fuel security crisis. In fact, it’s a chronic fuel security crisis. This isn’t breaking news. As long as seven years ago Air Vice Marshall John Blackburn (ret’d) warned of the fragility of our liquid fuel supplies but obviously no-one in the government at the time was listening. Current estimates indicate that we have about 25 days of petrol supplies and 20 days of diesel.

The flaw in this situation is our “just in time” supply chain – all dependent on crude oil and petroleum products shipped in from overseas to supply our domestic markets. If this is interrupted then in less than three weeks everything would start grinding to a halt, all private and commercial road and rail transportation, food supplies, healthcare, sanitation and water treatment just to name a few.

Now, Australia is signatory to the International Energy Agency (IEA) which mandates that member countries should hold a ninety-day liquid fuel reserve in case an interruption to the supply chain. Australia is nowhere near that level. In fact, our reserves are the lowest of 70 OECD countries. No-one in government knows exactly how much reserve we have at any one time and the situation will get worse with the future of our four remaining oil refineries in doubt.

So, I join up the dots and…bingo. The government has finally realised that we are heavily exposed on fuel security – dangerously exposed. And this is the solution to the problem? Shuttle crude and products into our ageing refineries, the largest of which is BP Kwinana. It’s a piecemeal solution at best. It’s also very dangerous.

A dangerous solution

By comparison, STS operations are prohibited outside the port limits of Singapore and Malaysia. The nearest STS area is the Nita Transit Anchorage Area (NITA) way to the south of Batam Island in Indonesia. Yet here in Western Australia STSs are being conducted just off our pristine beaches. The ships look to be inside port limits but they aren’t licensed to do STSs and the transfers are done without even the deployment of containment booms.

A spill, even a small one, will end up on our beautiful beaches. Could it happen? It’s high risk and foreign flagged ships don’t necessarily conform to their cargo security manuals. Look at the YM Efficiency and the APL England. A total of 120 containers lost overboard on Australia’s east coast. Losses can happen with tankers as well. Particularly ones that AMSA has little or no regulatory control over.

Australia has an oil transportation, refining and storage crisis. It’s been there since 2011 but always overshadowed by some other issue, be it changes of government, drought, bushfires and now the Covid-19 panademic.

We are wholly dependent on foreign-flagged tankers for our supply and distribution. We now technically have only one oil refinery (Kwinana) working at full capacity. Caltex in Lytton (Queensland) is in shutdown and is unlikely to reopen. Exxon Mobil in Altona (Victoria) is likely to close down at the end of this year and Viva Energy in Geelong has shut in major portions of its refining capability. Caltex Kurnell and Port Stanvac are long gone. That just leaves BP Kwinana with constraints on the size of tanker that can transit the Success and Parmelia channels.

Storage is another matter entirely. In almost disbelief we are told the latest plan is to hold our reserve fuel capacity in the US. That’s handy. It’s like running out of fuel on the Nullarbor and saying, “it’s fine, I’ve got some spare jerrycans in Adelaide.” They plan to spend $94 million of taxpayer dollars storing fuel in the US more than 12,000 kilometres away. It’s a quite preposterous plan. We can’t meet our 90-day fuel reserve so we stockpile in the US? Come on guys. How many storage tanks can be built in Australia for $94 million? Perhaps enough to meet our 90-day reserve?

We are living in troubled times and the government has a lot on its hands at the moment. But Scott Morrison has only just recently stated that Australia’s security is at the top of his list of priorities. Can he please put someone in charge of our energy portfolio that knows something about fuel security?

Kent Stewart

Founder of Maritime Engineers, a multi-region maritime consultancy with clients in the oil and gas industry, navy, commercial shipping and marine insurance, Kent Stewart is our resident expert on commercial shipping and the offshore industries.