Ampol’s Refining Struggles: Navigating the Downturn with Fuel Security Investments

Australia’s fuel security is under pressure, and Ampol, a key player in the nation’s energy sector, is feeling the pinch. With refining margins squeezed by global market forces and operational challenges, Ampol is strategically navigating this downturn through investments aimed at bolstering fuel security. The stakes are high: a reliable fuel supply is critical for Australia’s economy, national security, and the everyday lives of its citizens. As of 2021, 91% of fuel consumed in Australia was imported.

The Refining Downturn: A Perfect Storm

Several factors have converged to create a challenging environment for Ampol’s refining operations.

Global Refining Slump: Refining profits in Singapore, a bellwether for Asia, have weakened, impacting margins at Ampol’s Lytton refinery in Queensland. New refineries coming online across Africa, the Middle East, and Asia are adding further downward pressure.
Economic Headwinds: Slower economic growth and the rising popularity of electric vehicles in China are contributing to the slump in profitability for oil refiners.
Operational Issues: Ampol’s Lytton refinery has faced a series of operational setbacks, including planned maintenance and unplanned outages such as a refinery-wide steam failure and damage to a crude storage tank from Cyclone Alfred. These disruptions have curbed output and increased costs. In the first quarter of 2025, Lytton’s production dropped by 15% on the quarter.
Falling Margins: Ampol’s Lytton refinery margin decreased to $6.07 per barrel in the first quarter of 2025, down from $11.80 last year. For 2024, the Lytton refiner margin reached US$7.08/bbl, compared to US$12.81/bbl for the same time last year.

Fuel Security Investments: A Strategic Response

In the face of these challenges, Ampol is making strategic investments to ensure Australia’s fuel security and its own long-term viability. These investments are aligned with the Australian government’s broader efforts to strengthen the nation’s fuel supply chain.

Government Support: Ampol is eligible for the Fuel Security Services Payment (FSSP) program, which provides financial support to refiners during periods of low margins. This program, established by the Fuel Security Act 2021, aims to protect Australian refiners in a weak global refining market. Refiners become eligible for the FSSP when margin markers fall to A$10.20/bl ($6.49/bl), with a maximum of A1.8¢/litre available when the marker drops to a floor of A$7.30/bl.
Infrastructure Upgrades: Ampol is investing in upgrades to its Lytton refinery to produce higher-quality, ultra-low sulfur petrol. The Australian government is contributing up to $94.5 million to support these upgrades, which will help Ampol meet new fuel quality standards.
Minimum Stockholding Obligations: Ampol is complying with the government’s minimum stockholding obligations (MSO) for gasoline, diesel, and jet fuel. These obligations, which require importers and refiners to hold a minimum quantity of fuel, are designed to safeguard key transport fuel stocks at a baseline level.
Cost-Cutting Measures: Ampol is implementing cost-cutting measures to improve its financial performance. The company has flagged AUD 600 million in capital expenditure for 2025, alongside a AUD 50 million cost-cutting drive.
Deferral of Maintenance: To stabilize refinery performance, Ampol deferred a major maintenance shutdown of Lytton’s Fluid Catalytic Cracking Unit to mid-2026.

The Importance of Fuel Security

Fuel security is not just an issue for energy companies; it is a matter of national importance. A reliable fuel supply is essential for:

Economic Stability: Fuel is the lifeblood of the economy, powering transportation, industry, and agriculture. Disruptions to the fuel supply can have severe economic consequences.
National Security: Fuel is critical for military operations and defense capabilities. A secure fuel supply is essential for protecting the nation’s interests.
Everyday Life: Australians rely on fuel for transportation, heating, and other essential services. Fuel shortages can disrupt daily life and create hardship.

Government Initiatives to Bolster Fuel Security

The Australian government recognizes the importance of fuel security and has implemented a range of measures to strengthen the nation’s fuel supply chain. These measures include:

The Fuel Security Act 2021: This act established the FSSP and the MSO, providing financial support to refiners and ensuring minimum fuel stocks are maintained.
The Boosting Australia’s Diesel Storage Program: This program provides funding for the construction of additional diesel storage capacity.
The Refinery Upgrades Program: This program supports upgrades to Australian refineries to produce higher-quality fuels.
Maintaining Sovereign Refining Capability: The government is committed to maintaining a domestic refining capability to reduce reliance on imports.

Navigating the Future

Ampol’s refining struggles highlight the challenges facing the Australian fuel industry. However, through strategic investments, government support, and a focus on innovation, Ampol and the nation can navigate this downturn and ensure a secure and reliable fuel supply for the future. As Australia transitions to new vehicle technology, traditional liquid fuels are still expected to play an important role in Australia’s energy mix over the coming years. The company is also exploring market diversification to manage the energy transition.

The question remains: How can Australia balance the need for fuel security with the transition to cleaner energy sources?