Australia in Strait of Hormuz talks as ceasefire begins<\/a><\/p>\nDefence Minister Richard Marles says discussions will continue about Australia’s involvement in ensuring the Strait of Hormuz remains open.<\/p>\n
This crisis has exposed one of Australia’s key vulnerabilities.<\/p>\n
As an island nation, Australia imports 90 per cent of its liquid fuels.<\/p>\n
Most of the petrol, diesel and jet fuel that keeps the economy running comes from Asia.<\/p>\n
Singapore, which is one of the world’s top oil trading and refining hubs, is Australia’s biggest supplier of unleaded petrol.\u00a0<\/p>\n
Of the 80 or so fuel shipments arriving on Australian shores each month, about half come from Singapore, according to the Australian Institute of Petroleum CEO Malcolm Roberts.<\/p>\n
“About 55 per cent of our petrol is from Singapore,” he said.\u00a0<\/p>\n
“It’s our number one supplier of petrol, our number two supplier of diesel and jet fuel.<\/p>\n
“So that’s a pretty formidable supply of fuel coming from Singapore.”<\/p>\n
Australia a ‘trusted partner’<\/p>\n
Singapore’s three refineries are all located on the tiny Jurong Island, capable of processing up to 1.5 million barrels of crude oil a day, but its supply has been strangled.\u00a0<\/p>\n
Most of that crude typically comes through the Strait of Hormuz, meaning refineries have been forced to temporarily cut back production.<\/p>\n
“For example, Singapore Refining Company, which operates off Jurong Island, is operating at 60 per cent capacity due to the shortages. So what it is at the moment is a case of strategic self-sufficiency,” said Singapore-based CMC Markets sales trader Oriano Lizza.<\/p>\n
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Singapore’s Prime Minister Lawrence Wong visited Australia in October.\u00a0 (ABC News: Matt Roberts)<\/p>\n
Singapore’s prime minister acknowledged as much in a pre-recorded video to his citizens this week, in which he specifically mentioned Australia’s importance as a key LNG exporter. Singapore sources most of its gas from Qatar.<\/p>\n
“Our refineries and chemical companies are adjusting \u2014 scaling back production and sourcing crude oil and feedstock beyond the Middle East,” Mr Wong said in the video.<\/p>\n
“Our LNG importers are securing alternative supplies from global producers.<\/p>\n
“To build further resilience, we are working with trusted partners. In particular, Australia is a key supplier of LNG \u2014 it already accounts for more than one-third of our supply, and we will deepen this cooperation.”<\/p>\n
Australia’s status as a global gas giant gives Mr Albanese leverage in his talks with Mr Wong, but there are doubts about the extent to which the mercantile Singaporean government would seek to interfere in commercial supply agreements.<\/p>\n
LoadingBilateral meeting about ‘soft support’ over directives<\/p>\n
Anthony Patten, a Singapore-based energy lawyer and partner at Herbert Smith Freehills Kramer, said the three refineries were all privately owned and, unlike other countries in the region, there was “no specific government or ‘Singapore Inc’ involvement” in their operations.<\/p>\n
“There may be encouragement as a result of that [meeting] from the Singaporean side, to each of the producers as to the importance of the relationship,” he said.<\/p>\n
“It would be more soft comfort, soft support, rather than expecting anything directive.”<\/p>\n
Thailand has curbed its fuel exports while South Korea and China, Australia’s biggest suppliers of diesel and jet fuel respectively, have also imposed some export controls.<\/p>\n
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<\/p>\n
The Albanese government is in ongoing talks with regional partners to make sure Australia gets the fuel it needs. (AAP: Joel Carrett)<\/p>\n
As part of his regional charm offensive, Mr Albanese this week spoke with Chinese Premier Li Qiang about the importance of energy security, with both countries agreeing to “increase government to government communication”, according to a read-out of the phone call.\u00a0<\/p>\n
The prime minister is expected to visit other key fuel suppliers after Singapore.<\/p>\n
Yesterday, ahead of his Singapore trip, Mr Albanese had a phone call with Brunei’s Sultan, Haji Hassanal Bolkiah, to discuss fuel and the Iran war.\u00a0<\/p>\n
The conversation centred on maintaining global energy supply chains.\u00a0<\/p>\n
Australia sourcing fuel from further afield<\/p>\n
Australia’s fuel supplies are now guaranteed until “well into May” \u2014 a small improvement on last week’s forecast \u2014 reflecting the fact that shipments are generally confirmed about 60 days in advance.<\/p>\n
But with one of the world’s most critical oil transit choke points cut off, supply chains are being stretched to the limit as producers redirect and reshuffle cargoes to fill their supply contracts.<\/p>\n
Shipments that would normally come from Asia are now being sourced, for the first time, from the Gulf of Mexico, Sudan and even the United Kingdom \u2014 adding extraordinary time and additional costs to the cargoes.<\/p>\n
“It’s not the sort of thing you’d normally do,” Mr Roberts said.<\/p>\n
“There’s that extra shipping time and cost and there’s also some extra effort required to make the fuel compliant with Australian standards \u2026 but a couple of my members are indeed doing that.”<\/p>\n
The added costs are passed onto consumers.<\/p>\n
Importers walking tightrope but ‘system holding up’ for now<\/p>\n
With the Australian government now agreeing to underwrite future fuel shipments, reducing the risk for importers, Mr Roberts said his members were looking to Europe next.<\/p>\n
For now, shipments are arriving as expected and the “system is holding up”. But Australians are paying dearly and the longer the conflict drags on, the more precarious the position will become.<\/p>\n
“This is the tightrope I walk \u2014 the longer this war continues, the more refineries in Asia that’ll begin to reduce output, and the greater the risk is some countries will put in place export restrictions,” Mr Roberts said.<\/p>\n
“So we know these problems are building and if the war continues, things could sharply turn for the worse.”<\/p>\n
This crisis is a wake-up call for Australia.\u00a0<\/p>\n
The prime minister has talked about shielding Australians from the worst of it. But there is only so much a government can do when the country is at the mercy of its trading partners and global energy giants.<\/p>\n
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