BARA seeks declaration of Sydney jet fuel infrastructure

The Board of Airline Representatives of Australia (BARA) has applied to the National Competition Council for declaration of Sydney aviation jet fuel infrastructure.

In two separate, but related, applications BARA has sought declaration of the Caltex pipeline, which transports fuel from Caltex’s Kurnell refinery and from interconnection points with other storage facilities to the Sydney Airport Joint User Hydrant Installation (JUHI) facilities, as well as the JUHI facilities.

There are several matters related to the supply of aviation jet fuel at Sydney Airport that underpin BARA’s applications. They are:

1. The demand for jet fuel is expected to almost double from the current demand of about 2.9 gigalitres (GL) per year to over 5.6 GL per year by 2029.

2. Since about 2009, the total demand for jet fuel at Sydney Airport has begun to consistently exceed local refinery production (by Caltex and Shell). This means that imports of jet fuel will be necessary to meet forecast growth in demand.

3. The suppliers of jet fuel at Sydney Airport are currently limited to three of the four main oil companies, namely Caltex, Shell and BP, with Qantas undertaking a limited amount of self supply. Airlines advise that ExxonMobil withdrew from the market in 2010.

4. The only common-user bulk liquids berth in NSW available to receive imported jet fuel is at Port Botany. Once imported, the jet fuel is transferred to common-user storage facilities owned by Vopak. The Vopak facility has an interconnection point with the Caltex pipeline.

Declaration of the services provided by the Caltex pipeline and the Sydney JUHI will promote competition for the supply of jet fuel, into-plane services and for airline and other jet services at Sydney Airport.

If the current arrangements are allowed to continue, it is likely that the projected growth in jet fuel demand will be met from the incumbent suppliers and the potential increases in competition will be lost.

With the growing demand for jet fuel being met through imports, more opportunities will become available for new suppliers to enter and compete for the provision of jet fuel at Sydney Airport. Increasing the level of competition will promote cost competitiveness and greater reliability of supply.

New jet fuel suppliers may also seek to provide ‘end-to-end’ services to airlines and other jet operators (supply to final delivery into aircraft) and, hence, compete in the market for into-plane services to airlines at Sydney Airport.

Finally, the improvements in competitive conditions in the markets for jet fuel supply and into-plane services will improve the commercial opportunities for domestic and international passenger and freight services from Sydney Airport.

As these downstream markets are already competitive, the improvement in commercial conditions will result in a greater service offering and/or lower prices to passengers and freight customers.