A decision from Canberra later this year is hoped to determine how much plant- and animal fat-based content will become mandatory in Australian diesel.
Feedback on a policy consultation paper will shape the incentives biofuel producers should receive to prompt Australia to make a serious commitment to a home-grown, low-carbon fuel economy.
Hanging in the balance are the $3 billion biofuel refinery ambitions of partners GrainCorp, Ampol and IFM Investors and a proposed biodiesel and sustainable aviation fuel (SAF) production plant at Ampol's Lytton refinery in Brisbane.
Renewable fuel sector players want legislation on mandatory biodiesel blends through federal parliament next year. File picture.
The three-way partnership was formed in 2024 to investigate producing renewable fuel at Lytton.
That followed earlier partnering by the big agribusiness and the superannuation funds investor to plan a giant canola oil processing plant in either the eastern grain belt or Western Australia.
Both projects have been in a "study phase", partly awaiting a clear signal from Canberra about how it will encourage a stronger domestic renewable liquid fuels industry.
Every year about 75 per cent of Australia's canola crop, or typically about 6 million tonnes, goes overseas to primarily feed biodiesel refinery operations in Europe and Asia.
Most of Australia's waste cooking oil and tallow is also sold into our $5b annual overseas biofuel feedstock market.
Already cashed up, thanks to surging fuel prices this year, Ampol received $25m in Queensland government investment promises for its biofuel refinery plans in April, partly to help boost the state's fuel supply self-sufficiency.
The initial stages of the Lytton biofuel project would produce about 20m litres of renewable diesel from waste cooking oil, canola oil and other vegetable oils and tallow, potentially starting in 2028.
The managing director of Australia's biggest fuel business, Matt Halliday, said there was still no formal timeline for the refinery project, partly because the joint venture partners "need to see what is coming out of the policy consultation and where the government is heading".
Once that was clear the next decision point was to move to full front-end engineering design.
"It's a very expensive phase, and then we get to a final investment decision," he told the NSW Rural Press Club.
"It's not a decision we'd be taking in the near term.
"We still need to make the decision to move into that phase and get to a final decision over the next couple of years.
A year ago the federal government allocated $1.1 billion to promote a domestic low-carbon liquid fuels initiative over 10 years, promising production-linked incentives to attract private investment in renewable diesel and SAF production.
Transport Minister Catherine King has already confirmed biofuels will be mandatory in domestic diesel supplies in a move the government said would open new markets for Australian farmers while helping decarbonise some of the nation's hardest-to-abate sectors.
Canberra's consultation paper highlighted how a stronger domestic low-carbon liquid fuels industry also represented a significant opportunity for Australia to build more fuel security, creating jobs and investment in regional economies.
A stronger domestic low carbon liquid fuels industry represents opportunities to produce more fuel in Australia and boost investment in regional economies. File picture.
Mr Halliday said the government's consultation with the biofuel industry and other related players was looking at what kind of fuel production incentives needed to exist "to effectively level the playing field" for Australia to compete with offshore biodiesel and SAF producers.
"Not totally level, but at least, partially," he said.
"The second thing is how do you put in place a fuel demand mechanism - a mandate, or similar - that would build (blends) from a small percentage over time as the industry scales up."
The Ampol partnership has advocated for Canberra to set a volumetric target which would require a specific quantity of biofuel to be blended annually - initially 300m litres, rising to 1.2 billion by 2032.
Mr Halliday said that would mean blending about 2pc biodiesel into current diesel usage in Australia, and about 5pc SAF into jet fuel.
In their submission to the consultation process, the partners said it was critical to see legislation through federal parliament next year to quell increasing market uncertainty and give financial lenders confidence in the emerging sector.
In an industry renowned for volatile markets and margins, Mr Halliday said building new refining facilities with multi-decade capabilities required careful long-term consideration and revenue assurances.
Similarly, government ambitions to boost Australia's fuel storage reserves at refineries and elsewhere, required careful cost consideration.
"It's not very efficient to invest in storage, which is why we need government policy help to provide the right incentives to plan for the longer term," he said.
Ampol is cashed up with funds to spend on new refinery infrastructure after surging refinery earnings lifted its first-half after tax profit to $857 million. File picture.
If it goes ahead as proposed, the Brisbane biofuels project will involve about 1000 people in its construction, and would eventually employ about 150 extra permanent workers at the refinery.
Ampol had already invested about $1b in infrastructure upgrades at the 61-year-old Lytton in the past three years.
Fortuitously, soaring fuel prices this year have given Ampol a revenue windfall to draw on so it can fund more capital investment ambitions.
Last month the group posted a record first-half profit, with its refining margins leaping to an average $US28.26 a barrel, compared to just $US7.44 a year ago.
Underlying net profit after tax soared to $857.2m on a replacement cost basis, up from $180.2m for the six months to June 30 last year.
Fuel industry analysts anticipate current Iran war oil price rises will push Ampol's refinery margin to $US30/barrel.
Ampol's share price climbed above $44.80 this week, its highest in a decade, and almost double last year's near-decade low about $23.
