The Oil Drum

HB

Matt's point about the Strategic Petroleum reserv is apt as Australian oil is light and should have supply disruptions its the heavier crudes we need to make diesel.

Gippsland Crude is 42 too light for making diesel.

I would read Michael Richardson's article

http://www.opinionasia.org/Dryingupdownunder

Even shipping by rail requires disesl.

Its not as easy as not pumping it out of the ground.

The strategic reserve would be needed to provide a buffer for the 1st phase of supply disruptions.

Read here about some ideas brought forward by the AIP:

Crude Oil Supply disruptions outside of Australia are likely to be of the following
types:
1. A relatively small supply shortfall driven perhaps by Iraqi production ceasing ie 2.5mbd or 3% of world output.
2. A bigger shortfall driven perhaps by Saudi production ceasing ie 9mbd or 12% of world output.
3. Supply suddenly ceasing from an Asian country with replacement crudes being further away and therefore leading to a supply shortfall until replacement crudes
arrive.

And:

Government Intervention
In circumstances where crude oil availability world wide is constrained then the refining industry is best placed to search and procure alternative supplies at the best available price. If crude oil availability was constrained to the extent that the refining industry was not able to produce enough product for the Australian market and there were no alternative supplies of product available from outside of Australia, there would be a need for Government intervention to introduce demand constraint measures.

If crude availability in Asia were suddenly constrained then Australia could possibly be exposed to a shortage because alternative supplies were further away, possibly necessitating Government intervention to constrain demand.

However, if such a circumstance arose, it is possible for Australian refineries to process indigenous crude oil and condensate. The impacts would include:
• total petroleum product production would decrease by 30% ie to just over 600,000 bpd or 170,000 bpd less than demand;
• petrol production would probably be equal to local demand;
• middle distillate (diesel and jet fuel) production may be less than demand;
• there would be virtually no production of bitumen, lubricating oils and greases;
• there would probably need to be a relaxation of certain fuel standards such as sulphur in diesel (a portion of the Australian refining industry has already moved away from using certain Australian crudes in order to meet the 500 ppm sulphur diesel specification).
• There would be contractual issues associated with taking supply away from the normal customers for Australian exports.

http://www.aip.com.au/pdf/supply.pdf

This report is in urgent need for updating