Government Increases Fuel Security Payment Margins by 3.6 Cents per Litre
The Australian Government has increased financial support thresholds for Viva Energy’s Geelong Refinery, reflecting rising operating costs and reinforcing domestic fuel security through the decade.
- Government raises Geelong Refinery Fuel Security Payment margin cap and collar by 3.6 cents per litre
- Support triggers now start at 10 Acpl, up from 6.4 Acpl, reflecting higher operating and capital costs
- Maximum payment rate remains unchanged at 1.8 Acpl
- Viva Energy invested approximately $500 million in refinery upgrades and storage capacity
- Federal support extended through to the end of the decade to bolster Australia’s energy security
Government Adjusts Support to Match Rising Costs
In a significant move to sustain Australia’s domestic refining capacity, the Federal Government has increased the Fuel Security Services Payment (FSSP) margin thresholds for Viva Energy’s Geelong Refinery. The margin marker collar; the point at which financial support kicks in; has been raised from 6.4 Australian cents per litre (Acpl) to 10 Acpl, while the cap has increased from 4.6 Acpl to 8.2 Acpl. This adjustment equates to an uplift of 3.6 Acpl, or approximately A$5.7 per barrel, aligning the support mechanism with the refinery’s current operating and sustaining capital expenditure.
Maintaining Maximum Support Amid Rising Costs
Despite the higher thresholds, the maximum support rate under the FSSP remains steady at 1.8 Acpl, equivalent to A$2.9 per barrel. This means that while the government will begin providing financial assistance at a higher margin level, the total amount payable when margins fall below the cap remains unchanged. The payment is designed to bridge the gap when refining margins dip below the breakeven point, ensuring the refinery can continue operations despite market pressures.
Viva Energy’s Strategic Investments
Viva Energy has welcomed the government’s updated support framework, highlighting its substantial investments in the Geelong Refinery. Since the FSSP’s inception in 2021, the company has committed around $500 million to upgrade the refinery’s capabilities, including the completion of low sulphur petrol production in 2025 and the addition of 90 million litres of diesel storage in 2024. These enhancements not only improve operational efficiency but also strengthen fuel supply resilience for Victoria and broader Australia.
Implications for Australian Energy Security
Scott Wyatt, CEO and Managing Director of Viva Energy, emphasised the critical role domestic refining plays in national energy security. With the Geelong Refinery supplying roughly half of Victoria’s fuel needs and holding a significant share of the country’s oil reserves, the government’s continued support signals a commitment to maintaining local refining capacity amid global market uncertainties. The FSSP’s extension through to the end of the decade provides a degree of certainty for the sector, which has faced rising costs and competitive pressures in recent years.
Looking Ahead
While the updated FSSP settings address current cost pressures, the evolving energy landscape and potential future policy shifts will remain key factors for Viva Energy and the broader refining industry. The government’s willingness to recalibrate support mechanisms underscores the strategic importance of domestic refining, but ongoing monitoring of market conditions and cost structures will be essential to ensure the sector’s viability.
Bottom Line?
The government’s recalibrated support strengthens Geelong Refinery’s outlook but leaves future policy and market dynamics in focus.
Questions in the middle?
- How will the increased FSSP thresholds impact Viva Energy’s profitability in the near term?
- Could further government adjustments be necessary if operating costs continue to rise?
- What are the implications for fuel prices and supply stability across Australia?
