Australia Wants to Build Its First New Oil Refinery Since 1965

Almost every litre you pumped this week arrived here on a ship. Not from a plant in Geelong or Brisbane, but off a tanker loaded in Singapore, South Korea or Malaysia. That quiet fact is the reason the federal government has just put money behind something this country has not seriously attempted in sixty years.

On 27 July, Prime Minister Anthony Albanese and Western Australian Premier Roger Cook stood at Perdaman's Project Ceres site in Karratha and announced a jointly funded $4 million study into a brand new fuel refinery. It's the first agreement struck under a $10 million Commonwealth program set up to examine new or expanded refining capacity, and the sites on the shortlist sit well south of where the announcement was made. Geraldton, Perth, Bunbury and Collie are all in the mix.

Perdaman is owned by billionaire Vikas Rambal, a name better known in fertiliser and industrial chemicals than in petrol. If the thing ever gets built, it would be the first large scale fuel refinery constructed in Australia since the 1960s.

Four million dollars is not a refinery. It's a study about whether to do a study. But the fact it exists at all tells you how much has changed in eighteen months.

Nine became two, and nobody really noticed

Here's the backstory most motorists have never been told. At the turn of the century Australia ran nine refineries. Port Stanvac in South Australia shut in 2003. Clyde in western Sydney went in 2012, Kurnell in 2014, Bulwer Island in Brisbane in 2015. Then 2021 delivered the double blow: BP Kwinana in WA and Mobil Altona in Melbourne both closed inside months of each other.

Two are left. Ampol's Lytton plant near Brisbane and Viva Energy's Geelong refinery. Between them they turned out roughly 12 billion litres of petrol, diesel and jet fuel in 2025, which sounds enormous until you realise it covers only about 20 per cent of what the country actually burns. The other 80 per cent comes in finished, on ships, from refineries we do not own in countries we do not control.

Lytton, incidentally, opened in 1965. That's the benchmark this WA proposal would have to beat. A refinery that started up when Menzies was still Prime Minister remains the newest one we've got.

Why the mood changed in 2026

For years the standard argument against local refining was simple economics. Australian refineries are small by global standards, competing against Asian mega plants built at ten times the scale. Importing was cheaper. The market spoke, the refineries closed, and governments largely let it happen.

This year tested that logic to breaking point.

The Middle East conflict that flared in February sent crude sharply higher and dragged retail prices with it. According to the ACCC, which switched from quarterly to weekly monitoring in March, average retail petrol across the five largest cities climbed 86.3 cents per litre between 20 February and the end of March. That's roughly a 50 per cent jump in about five weeks. Canberra responded with a temporary 32 cent excise cut from 1 April, halved to 16 cents on 1 July, then gone entirely on 3 August when excise snapped back to 53.7 cents.

Then, on 15 April, fire broke out at the Geelong refinery. The alkylation unit inside the petrol complex was damaged, cutting the site's petrol output to around 60 per cent of capacity. Viva restarted the residue catalytic cracking unit on 23 June and got the plant back above 90 per cent, which was the good news. The less publicised part: the company expects Geelong to run without alkylation capacity right through 2027.

One fire, at one plant, in one Victorian city, and a meaningful slice of national petrol supply wobbled for months. That's what having two refineries feels like in practice.

The subsidy nobody talks about

While all that was happening, the government quietly rewrote the deal keeping both survivors alive. The Fuel Security Services Payment, introduced in 2021, tops refiners up when margins get thin. On 20 March, after a six month review, Energy Minister Chris Bowen lifted the upper margin threshold at which support kicks in from 6.4 cents per litre to 10 cents, and extended the scheme from 2027 out to 30 June 2030.

Bowen described the payment as an insurance policy while conceding the original design was flawed. The evidence backed him up. Refiners had triggered the payment only twice since it started. A safety net that almost never catches anyone isn't much of a safety net.

In return, both Ampol and Viva signalled plans to keep refining into the next decade. Ampol also shifted its Lytton maintenance shutdown from June to August, freeing up an extra 300 million litres of domestic capacity during the worst of the supply squeeze.

To put this in perspective

Australia has sat below the International Energy Agency's 90 day stockholding benchmark for well over a decade, and the government has spent 2026 running temporary relief measures to keep the taps flowing. Minimum stockholding requirements were cut by 20 per cent. Petrol sulfur limits were loosened from 10 parts per million to 50 to redirect fuel that would otherwise have been exported, a measure running until 30 September before a transitional 40ppm allowance carries through to 31 December.

Compare that to Japan or South Korea, both heavy importers of crude, both of whom refine domestically at scale and export the surplus. They import the raw material and keep the value adding, and the strategic buffer, onshore. Australia gave that up over twenty years, one closure at a time, without much of a national conversation about it.

What this actually means for your wallet

Not much, and not soon. That's the honest answer.

A new WA refinery would not make petrol cheaper at your local servo. Australian pump prices track the Singapore benchmark for refined product regardless of where the fuel is made, and refining margins are a small slice of the final number compared with crude, excise, GST and retail markup. Anyone selling you a refinery as a price cut is selling you something.

What it would buy is resilience. Fewer weeks where a single fire or a single shipping disruption ripples into what you pay. Steadier diesel prices for the mining, freight and farming operations across Western Australia that cannot simply wait for the next tanker. More predictable supply into regional areas, which is exactly where the 2026 squeeze bit hardest.

Timing wise, temper expectations. This is a study, which leads to a full feasibility assessment, which leads to a final investment decision, which leads to years of construction. Even on an optimistic run, we're talking about the 2030s. Your unleaded price this weekend is unaffected.

The genuinely interesting question is whether anyone will commit billions to a forty year petroleum asset while the vehicle fleet electrifies underneath it. The answer probably lies in diesel. Trucks, mining equipment, tractors and shipping are not switching quickly, and diesel demand looks far more durable than petrol demand over the same horizon. A refinery weighted toward diesel is a very different investment case to one built around filling family cars.

Worth remembering

Fuel security is one of those topics that sounds abstract right up until the week it isn't. This year it stopped being abstract. Keep an eye on where that WA study lands.