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– Liquid Fuel Supply Security
– Liquid Fuel Vulnerability Assessment
– National Energy Security Assessment
– Oil Supply Emergencies &
   the IEA Response System
– National Oil Supplies Emergency
   Committee
– Liquid Fuel Emergency Simulation
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SUPPLY SECURITY

Liquid Fuel Supply Security

The Australian liquid fuel supply chain has considerable span and diversity – from crude and product shipments, refinery throughput, storage facilities, extensive terminal and distribution networks, around 5700 retail outlets, and major customer storage facilities throughout Australia. This supply chain delivers a high level of supply reliability and security by global standards, despite the significant challenges in distributing fuel around a country as large as Australia.

In AIP's view, the reasons why Australia currently enjoys a high level of liquid fuel security include:

• diversity of supply sources for crude oil and petroleum products – both domestic and imported sources
• robust, flexible and reliable supply chains – both internationally and domestically
• a domestic refining capability – which increases the number of supply options available and provides other supply security and economic benefits including the ability to convert domestic oil production into useable product
• imported petroleum products providing an increase in the diversity of sources of potential supply in the event of disruptions to domestic refinery production
• efficient supply management – including rapid and comprehensive commercial strategies in place to respond to supply disruptions.

This AIP view is supported by recent independent and government analysis of liquid fuel supply security and vulnerability (see below).

For more information on the fuel supply chain in Australia and how supply reliability continues to be maintained at high levels by industry, see www.aip.com.au/industry/supplyreliability.htm.

The industry and Australian governments recognise the potential risks and impacts of a disruption to domestic liquid fuel supplies, and AIP and its member companies actively participate in a variety of government sponsored processes such as the National Oil Supplies Emergency Committee. While every effort is made by industry to ensure continuing reliable supply, NOSEC and IEA processes (see below) will help ensure a coordinated response in the event of any unforseen liquid fuel or oil supply emergencies at a national or international level.

Liquid Fuel Vulnerability Assessment

ACIL Tasman was engaged by the Federal Department of Resources, Energy and Tourism (DRET), on behalf of the National Oil Supplies Emergency Committee (NOSEC), to examine Australia's current level of liquid fuel vulnerability and significant trends which may affect this up until 2020.

The Liquid Fuel Vulnerability Assessment comprehensively explores issues like global supply-demand of crude oil and petroleum products, 'peak oil', supply security, and supply chain reliability and flexibility into and within Australia.

According to DRET:

• "The Liquid Fuel Vulnerability Assessment provides a current and forecast assessment of Australia's level of vulnerability to disruptions and/or heightened risks to the supply of liquid transport fuel, both in the short and longer term. It provides a clear and coherent explanation of demand and supply side risks impacting on Australia's liquid fuel availability, identifies critical issues affecting the level of liquid fuel vulnerability and assesses the current and future level of liquid fuel vulnerability up until 2020."
• "The vulnerability assessment will be utilised by the Australian Government to inform future policy developments in regards to Australia's broader energy security considerations."
• "It has directly contributed to the Australian Government's National Energy Security Assessment (NESA) in respect to matters relating to liquid fuels." (see below)
• "The Liquid Fuel Vulnerability Assessment will also be utilised by NOSEC for establishing and implementing appropriate management frameworks to support an efficient and effective response to a national liquid fuel emergency."

A copy of the Liquid Fuel Vulnerability Assessment, which was released on 27 March 2009, is available through the following link:

Liquid Fuel Vulnerability Assessment (LFVA)

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National Energy Security Assessment (NESA)

The Federal Government also released the National Energy Security Assessment (NESA) on 27 March 2009. The NESA identifies the current strategic energy security issues in the liquid fuels, natural gas and electricity sectors, and those posing a potential risk in 5 years (2013), 10 years (2018) and 15 years (2023). The Government has indicated that the NESA will provide a key input into the development of future energy policy including the Energy White Paper which is also being prepared by the Government.

A copy of the NESA is available through the following link:

National Energy Security Assessment (NESA)

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Oil Supply Emergencies & the IEA Response System

The International Energy Agency (IEA) is the energy forum for 28 industrialised countries, founded in 1974 (see www.aip.com.au/pricing/iea.htm). IEA member country governments are committed to taking joint measures to meet oil supply emergencies. They also have agreed to share energy information, co-ordinate their energy policies and cooperate in the development of rational energy programmes. In Australia, the National Oil Supplies Emergency Committee (see below) fulfils the role of National Emergency Sharing Organisation, which is an ongoing requirement of Australia's membership of the International Energy Agency.

Emergency response to oil supply disruptions has remained a core mission of the IEA. The IEA emergency response mechanisms were set up under the 1974 Agreement on an International Energy Program (IEP Agreement). The IEP Agreement requires IEA member countries to hold oil stocks equivalent to at least 90 days of net oil imports and – in the event of a major oil supply disruption – to release stocks, restrain demand, switch to other fuels, increase domestic production or share available oil, if necessary. IEA collective response actions are designed to mitigate the negative impacts of sudden oil supply shortages by making additional oil available to the global market through a combination of emergency response measures, which include both increasing supply and reducing demand. Although supply shortages may bring about rising prices, prices are not a trigger for a collective response action, as these can be caused by other factors and the goal of the response action is to offset an actual physical shortage, not react to price movements.

For more information on the IEA decision-making process leading to an IEA collective action, the measures available, how this is implemented, and the historical background of major oil supply disruptions and the IEA response to them, see the following IEA report:

IEA Response System for Oil Supply Emergencies (2008)

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National Oil Supplies Emergency Committee (NOSEC)

The NOSEC is a committee of the Ministerial Council on Energy (MCE) and provides the main executive channel through which Commonwealth and State Governments formulate their overall management response to a national liquid fuel emergency.

The task of the NOSEC is to ensure that the Federal Minister for Resources, Energy & Tourism and the MCE receives relevant advice and information on issues confronting national supply of crude oil and petroleum products.

NOSEC manages the National Liquid Fuel Emergency Response Plan (NLFERP) which details how Australian governments would respond to a fuel disruption with national implications.

NOSEC also fulfils the role of National Emergency Sharing Organisation, which is an ongoing requirement of Australia's membership of the International Energy Agency (IEA).

NOSEC comprises representatives from the Commonwealth (chair), the states/territories and the downstream petroleum industry – including AIP, Shell, ExxonMobil, Caltex, BP and Woolworths.

AIP and its member companies are active participants in NOSEC and in all NOSEC discussions support a strong market based approach to responding to any fuel supply emergency, and that maximum use is made of existing commercial and business practices along the supply chain.

Liquid Fuel Emergency Simulation Exercises

In 2008, the Department of Resources, Energy and Tourism (DRET), on behalf of NOSEC, undertook a Liquid Fuel Emergency Simulation Exercise – 'Catalyst 2008'. The aim of 'Catalyst 2008' was to test the emergency preparedness of the Commonwealth State and Territory Governments and industry to manage a national liquid fuel emergency. In particular, it tested arrangements for identifying and rationing fuels to essential users and bulk allocation arrangements, as well as communication strategies and mechanisms. Representatives from industry and State and Federal governments participated in 'Catalyst 2008' and the exercise built on the outcomes of the Federal Government's last simulation exercise – 'Exercise Tanker 2003'.

According to DRET, "Catalyst 2008 will be part of a more regular series of testing Australia's emergency preparedness".

A copy of the 'Catalyst 2008' factsheet is available through the following link:

Factsheet: 'Catalyst 2008' Simulation Exercise

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