Shipping reforms ‘a threat to petrol’

Annabel Hepworth, National Business Correspondent
April 26, 2012
The Australian

PETROL giants have warned that fuel supplies could be disrupted and the economic viability of Australia’s oil refineries further impaired as a result of Labor’s coastal shipping reforms.

In a bid to convince parliament to scale back restrictions on access for foreign vessels to Australia’s coast, the Australian Institute of Petroleum – which represents Mobil Oil, Shell, BP and Caltex, who supply 90 per cent of the nation’s petroleum fuel needs – has deemed key planks of the government’s reforms to be a threat to Australia’s liquid fuel security.

Local refinery operations are already under massive pressure because of the strong Australian dollar, high operating costs and the rise of Asian “mega-refineries”.

Shell has decided to convert its Clyde refinery in Sydney to an import terminal next year, while Caltex is reviewing whether to close down its two domestic refineries in Sydney and Brisbane.

The AIP has warned that the Coastal Trading Bill that was introduced to parliament last month “will dramatically increase the risk of supply disruptions”, while Caltex has said that some shippers might get access to crucial temporary licences for foreign-flag vessels only if they claimed “bogus” or “fictitious” voyages in their applications.

As there are no Australian-flagged crude oil or petroleum product tankers operating along the nation’s coast, refiners often charter foreign-flagged vessels to move fuel from refineries and terminals along the coast.

Last night, Infrastructure Minister Anthony Albanese hit back, saying that “many of the claims raised show a serious lack of understanding of how the new bills and even the current system works”.

“The reforms increase transparency and certainty for industry, something that the industry themselves asked for,” he told The Australian. “This transparency is about addressing the fact that under the current system, many operate within the breach.”

Mr Albanese said that he had already made “significant” changes to Labor’s plans after an industry roundtable in February and expected consultations would continue.

The government has introduced a package of five bills to revitalise the domestic shipping industry because the domestic fleet has plunged from 55 ships to 21 over the past decade and fears that within five years there will be no Australian ships operating in the major trades.

Under the new laws, the system that issued licences and permits to foreign ships will be scrapped. A new temporary licensing system will allow the foreign-registered vessels to operate for 12 months at a time, subject to conditions on their time, trade and voyage.

Existing foreign-registered ships will be expected to get Australian registration within five years.

But the oil refiners fear the new system will tangle them in unnecessary red tape. The refiners are pushing for exemptions for crude oil and petroleum product vessels from the new law.

But Mr Albanese is staring this down, saying the provisions on exemptions in the Coastal Trading Bill replicate those in the existing Navigation Act “and we don’t expect that to change”.

Caltex – which operates two of Australia’s seven refineries – has warned that the proposed laws “will have a potentially adverse impact on the viability of our refining operations”.

“If the government wishes to intervene in the shipping market, the costs should be explicit through concessions to Australian flag vessels rather than hidden through regulatory burdens on other Australian industries,” Caltex says. “It is essential that coastal shipping be part of the national productivity agenda and not result in increased costs, especially at a time when productivity has been identified by government and industry as a matter of importance for the future of Australian industry.”
BP Australia’s shipping division has taken a less hardline view, saying it has several concerns about the plans but thinks the law should be workable.

Government sources maintain that the proposed legislation codifies a number of existing practices that were contained in ministerial guidelines but not clearly articulated in legislation.

It is understood the government has had a significant number of one-on-one briefings with both Caltex and BP to discuss the bills.

While many business groups raise concerns that the coastal shipping plans could drive up the costs of shipping cargo, the Maritime Union of Australia supports the reforms, as does the ANL Container Line.

ANL says the industry is in “dire straits” and that while much shipping can be done by overseas interests, there is still a “significant need” to develop maritime skills for areas including the offshore oil and gas industry.