Australia Backs Refinery Feasibility Study in Karratha as Iran War Exposes Import Dependence
Canberra's A$4 million commitment funds a study only; the first new Australian refinery in six decades remains a distant prospect.
Australia's federal government committed A$4 million ($2.8 million) on Tuesday (2026-07-28) to assess the feasibility of a new oil refinery in Karratha, Western Australia. If built, it would be the first domestic refinery constructed in the country since the 1960s, Prime Minister Anthony Albanese announced.7,6
The study sits within a broader A$15 billion package to strengthen Australia's energy resilience. Resources Minister King said on radio on Tuesday (2026-07-28) morning that the assessment would examine various sites, not only Karratha.7
The timing reflects how exposed Australia's fuel supply chain proved during the Iran conflict, which tightened shipping risk and pressured global refined product markets. One of Australia's two operating refineries was also offline after a fire, leaving Canberra scrambling for imported product.2,7
The emergency procurement deals that followed moved quickly. In May 2026, Albanese confirmed three jet fuel shipments totalling more than 600,000 barrels from China, expected from early June, plus 38,500 tonnes of agricultural-grade urea from Brunei. By April 2026, the government said it had secured roughly 100 million liters of additional diesel from Brunei and South Korea. Queensland got a further 40 million liters of diesel arranged through Freedom Fuels and Export Finance Australia, with the cargo due in Brisbane in June 2026.1,2,3,5,6
Together those volumes bought immediate breathing room. They did not resolve the deeper exposure. Australia imports the bulk of its refined fuels and was, as the Iran conflict demonstrated, vulnerable to any disruption in global product flows.2
The Karratha study involves Perdaman Group, an industrial company with existing operations in the region. A related fertilizer facility would have capacity to produce up to 2.3 million tons per year, a significant share of Australia's annual usage according to the company. That project has received A$475 million in government loans, per a statement from the prime minister's office.7
The refinery study is a separate and considerably earlier-stage commitment. A$4 million funds a feasibility examination only. King said on Tuesday (2026-07-28) the review would consider various sites, meaning final location selection and any investment decision remain well ahead.7
The gap between a feasibility study and refinery construction is wide. Australia has not built a new refinery in roughly six decades. Global construction timelines for such facilities typically run to many years even after finance and permits are secured, and the A$4 million allocation is an initial screening exercise, not a capital commitment.7,6
Australian energy market prices offer some context on the economics. Wallumbilla gas was trading at A$11.21 per gigajoule on Wednesday (2026-07-29). JKM, the Asian LNG benchmark, stood at $21.32 per MMBtu on the same date. Any Karratha refinery would need feedstock supply arrangements and would compete against Asian import prices that have been elevated since the Iran conflict disrupted regional trade flows.
The refinery proposal also sits alongside a separate policy debate over LNG exports. A gas reservation scheme proposed in December 2025 would require east coast LNG exporters to keep between 15% and 25% of output for the domestic market, taking effect in 2027 for new contracts. Analysts said at the time the scheme could reduce available supply and push buyers toward alternative sources. The proposal's current legislative status is not clear from available reporting.4
For a potential refinery investor, the key variable is whether the feasibility study produces a commercially viable design at a cost that competes with long-term import supply agreements, particularly as Asian refined product trade re-routes following the Iran conflict. Perdaman's fertilizer project, backed by A$475 million in government loans, could provide a parallel revenue base to support project finance if a refinery is co-located. But that depends on what the study concludes.7
The first concrete signal will be a published tender or technical consultancy appointment for the study. If neither emerges over the coming months, the Karratha announcement will have served primarily as a statement of intent, with a very small initial sum attached.7