Minister for Defence Christopher Pyne has announced federal government approval of the Defence Fuel Transformation Program, valued at $1.1 billion over the next 30 years.
The program aims to deliver a "safer, simpler and more assured" Defence fuel network in partnership with industry.
“The Program will make targeted investments in the Defence fuel network to seize immediate opportunities to improve flexibility and increase the level of industry collaboration,” Minister Pyne said.
“The Defence Fuel Transformation Program will ultimately reduce network risk, improve the ability of the fuel network to deal with disruption, and reduce the cost of ownership to Defence.”
Under the Program, Defence will contract out the provision of fuel and operations and maintenance of Defence fuel facilities at selected locations.
The first tranche of the Program, worth $127 million, will be delivered over a three-year period with focus on Workplace, Health, Safety and Environment risk reduction and compliance activities.
The strategy will be implemented through six pillars: risk reduction, industry collaboration, optimised footprint, clear requirements, technology-enabled network, culture of ownership and accountability.
“The Defence Fuel Transformation Program will provide significant opportunities for regional businesses, delivering on the Government’s commitment to growing Australian industry and securing jobs,” Minister Pyne said.
ADM Comment: The purpose of this program stems from a need identified in the 2016 White Paper: “The Government will remediate Defence’s fuel storage and distribution installations and improve Defence’s fuel resilience.
“This will include upgrades to existing Defence fuel infrastructure as well as improvements to our ability to utilise commercial fuel supplies.”
Given that recent flying operations at EX Pitch Black suffered fuel issues, including contamination and as ADM understands a lack of fuel to the point of significantly disrupting operations, this move cannot come soon enough.
Interestingly, the statement above briefly mentions that the Program will ‘improve the ability of the fuel network to deal with disruption’. The implication is that outsourcing the management of selected facilities helps achieve the White Paper’s goal of improving ‘Defence’s fuel resilience’.
However, in the September edition of ADM, AVM (Retd) John Blackburn argued that markets "cannot be held responsible for fuel security".
"When I was researching my fuel security reports I had the opportunity to interview the CEO of one of the Australian based oil companies," AVM Blackburn said. "He made it clear that energy security was not his responsibility; his responsibility was for the reliable supply of fuel to his customers and a return for his shareholders.
"Governments must take that responsibility.”
There are two issues at play here. The first is facility modernisation and workforce safety, and the second is overall fuel security.
Whilst the Fuel Improvement Program targets facilities and safety, it does not address the wider fuel security issue identified by AVM Blackburn. It is difficult to reconcile the sentence “Defence will contract out the provision of fuel and operations” with “markets cannot be held responsible for fuel security.” Fingers of responsibility are pointed at each other.
This disparity does not force the conclusion that industry collaboration and fuel security are mutually exclusive. The US Strategic Petroleum Reserve, for example, is managed under contract with Fluor Corporation. Stored in salt caverns in Louisiana and Texas, it is the largest supply of emergency crude oil on the planet.
In a recent statement announcing a US$2 billion contract extension to 2024, Fluor Corporation outlined how the supply is managed.
“In an energy emergency, SPR oil would be distributed by competitive sale,” Fluor said. “The SPR has been used in these circumstances three times: in 1991 during Operation Desert Storm, in 2005 after Hurricane Katrina, and in 2011 as part of an International Energy Agency coordinated release to offset crude oil supply disruptions due to Middle East unrest.”
Whilst the US model may not be replicable in Australia, it is evidently possible for government to achieve fuel security alongside industry. Yet despite today’s announcement, the issue remains largely unaddressed.