There has been much written about Australia’s high-risk fuel security situation, noting that around 90% of the liquid fuel we use is derived from oil sourced from overseas, with most commentary focusing on Canberra’s delinquency in meeting short-term requirements. Australia is the only International Energy Agency member that for years hasn’t met the standard of 90 days of stocks, holding only 52 days in September 2025.
Yet even if the nation met the 90-day threshold, what would Canberra do in a longer total supply disruption? What if it was six months, a year, more?
Few published works address this scenario in any detail, possibly as it would likely only occur in the most improbable of contingencies – Australia’s involvement in a major war against China.
Yet a responsible approach to risk management demands that just such situations be considered. Australia is critically dependent on liquid fuels for national survival, with a Commonwealth report noting it powers 98% of the transport sector, including food distribution; 83% of coalmining operations, sustaining much of the energy grid; and essentially all the operations of the Australian Defence Force (ADF). Further, the risks of war are increasing due to Beijing’s rising power and the United States’ potential retreat to its hemisphere.
So, what can be done? A disruption of unknown duration means focusing on purely Australian production, as it’s impossible to store enough fuel for an indeterminate period.
On this topic, a well-buried Commonwealth report from 2020 provides the most insight. Then, Australia consumed around 1 million barrels per day (bpd) of fuel in peacetime. The report observed that normal operations of critical services (defence, power generation, etc) required around 26% of this and that, happily, the nation’s domestic refineries could provide some 30%.
So, surely all’s well then? Alas, no.
Since 2020, Australia’s refining capacity has shrunk to only two plants producing 230,000 bpd in total (i.e. 23% of the 1 million bpd needed). Also, the report ignored that during war, the ADF’s operations (and fuel needs) would dramatically escalate, let alone any required for allied forces in Australia.
Gas-to-liquids technology promises an available and enduring solution to a dangerous and increasingly likely fuel security contingency.
Further, Australia’s domestic crude oil stocks are forecast to run out by 2030, leaving our refineries to operate on condensate (a very light oil) that should last until 2039. Yet condensate is much less suited for refinement into fuel, so in a post-2030 war, domestic production might meet only 10% of needs. Finally, even if critical needs could be met, this would still starve the rest of the country, with devastating effects on quality of life.
Fortunately, a little-discussed alternative exists that can address these concerns: gas-to-liquids (GTL) technology, which converts natural gas into fuels and chemicals. The world’s largest plant, Shell’s Pearl GTL facility, converts daily some 1.6 billion cubic feet of gas into 140,000 bpd of fuel and 120,000 bpd of other liquids. Pearl took some four years to build at a cost today of around $33 billion.
Applying Pearl to Australia highlights the benefits. One plant would meet around 14% of the 1 million bpd requirement, and if construction started in 2027 could be online by 2031 – compensating for the crude running out. Three plants built over 12 years could, by 2039, meet 42% of requirements and be fed by coal seam gas that won’t deplete until 2060.
Such plants would require no (politically unpalatable) new oil or gas exploration, and if built expressly for emergency use would not impact Australia’s peacetime gas export or chemical import agreements (noting GTL can produce many needed chemicals). Further, in a war situation where fuel imports are cut off, then so almost certainly would be gas exports – leaving them nowhere to go bar meeting Australia’s needs.
Finally, GTL would enable maintaining other critical imports (such as pharmaceuticals and machinery) via convoys guarded by the Navy. Reporting shows some 6100 cargo vessels, including 650 fuel and chemical tankers, serve Australia’s import and export needs – far too many to protect.
Yet without the export bulk and livestock carriers, the tankers, and vehicle carriers (presuming cars are not critical), barely 600 cargo ships remain. Surely only a fraction of these would meet critical needs, perhaps as few as the 50 proposed by the Strategic Fleet Report – a much more feasible number to guard.
Three Pearls would cost $99 billion, so where might funding come from? The $368 billion nuclear-powered submarine (SSN) program is a ripe plum, not least since GTL substantially obviates a key SSN rationale of keeping the sea lanes opens. Alternatives include the already rising defence budget, investment from allies (who would benefit in wartime), or Australia’s superannuation funds, which need to invest $3.2 billion per week.
Regardless of the funding source, GTL promises an available and enduring solution to a dangerous and increasingly likely fuel security contingency. It’s to be hoped that Canberra approaches the option with open eyes.
