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

An explosion and fire that badly damaged Viva Energy’s Corio oil refinery in Victoria could push petrol prices higher and trigger stage three of the government’s fuel emergency system, which includes voluntary rationing.

Viva Energy chief executive Scott Wyatt said it was too early to know how much petrol production would be lost to the blaze, which was extinguished Thursday afternoon after being too dangerous for firefighters to approach most of the day.

Two petrol production units across an area of about 30 square metres were badly damaged after a valve failed around 11pm Wednesday, releasing gas and triggering an explosion. An estimated 40 to 50 workers were at the facility at the time. No injuries were reported.

Operating 1287 service stations under the Reddy Express, Shell, On the Run (OTR), Liberty and Westside Petroleum brands, Viva’s refinery south-west of Melbourne supplies around 50 per cent of Victoria’s fuel and 10 per cent of the nation’s. The company’s shares were suspended from trading until Monday.

Prime Minister Albanese said the “very distressing” scenes at the refinery would hit fuel supplies but assured motorists the refinery would be restarted as quickly as possible.

“We will continue do what we can to make sure anything offline is brought online as soon as possible,” he said in Malaysia.

Mr Albanese was in Asia to negotiate the purchase of an additional 100 million litres of diesel from Brunei and South Korea.

Prime Minister says impact unclear

Gero Farruggio, the head of Australia at consultancy Rystad Energy, said it was “inevitable” the government would impose Stage three restrictions under the emergency fuel plan introduced in response to the Middle East war.

“With the Geelong refinery now out of action — and first reports suggesting it could remain so for a significant period — I cannot see how Australia avoids moving to Stage Three. The two crises are now compounding each other,” Mr Farrugio said.

“To be clear about the Middle East dimension: even if a ceasefire were declared tomorrow, the best-case scenario still sees fuel supply chains disrupted for a further two months as shipping routes, refinery output, and distribution networks normalise.

“The Geelong fire does not replace that problem — it sits on top of it. The combined impact on Australia’s domestic diesel and jet fuel supply is severe, and the price consequences for consumers, freight operators, and aviation will be significant.”

Geoff Trotter, the co-founder of fuel supply consultancy Fueltrac, said he expected petrol prices to rise. “That’s the way it normally works,” he said.

Overseas help

But the Viva CEO expressed confidence the refinery could fill any shortfalls with fuel from overseas — although didn’t say how much.

“Our priority is first and foremost for our people and keeping them safe and helping them recover from the experiences they had,” Mr Wyatt 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.”

Viva Executive General Manager for Energy and Infrastructure Bill Patterson said the refinery would lose a “little bit” of production but “not a very large amount.”

Viva Energy operates an import terminal at the Corio refinery, although finding extra oil supplies from overseas may be complicated by the global shortfall. The refinery produces about 120,000 barrels of oil per day, and employs over 1100 people.

AWU Victorian 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.

Refining subsidies

On March 20, the Federal Government said it would extend its Fuel Security Services Payment programme to subsidise 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, Queensland, rose 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,” Mr Trotter said.

“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 Chris Bowen said the “fast moving situation” would affect supply of diesel and jet fuel.

“We’ll make further assessments on what the impact on petrol production will be,” he said. “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, he said.

7/11 petrol stations

Other petrol and diesel suppliers include the 7/11 service stations supplied by Mobil, which has an import terminal in Altona, Victoria. United Petroleum’s 500 or so service stations across are supplied by an import terminal in Hastings, Victoria.

“For those companies that don’t have a refinery, some are involved in refinery exchange,” Mr Trotter said. “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 was not considered suspicious.

Viva said it organised a community meeting at 6pm on Thursday evening in the local area to reassure local residents, which include boarders at Geelong Grammar School, one of the state’s most expensive.