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Case Study: Sydney

Special Report - SafetySydney Airport has suffered from concerns over the robustness of its fuel supply in recent years, a challenge that will become increasingly difficult to overcome as traffic increases.

According to the Board of Airline Representatives of Australia (BARA), traffic at Sydney Airport is expected to more than double by 2029, from about 35 million passengers per annum (mppa) to 80 mppa. The supply of jet fuel will need to rise correspondingly, increasing to more than 5.5 gigaliters per year from the present 3 gigaliters.

BARA notes that, since 2009, jet fuel demand at Sydney has begun to exceed the local refinery production controlled by Caltex and Shell. This suggests that the only way to meet the forecast growth will be through fuel imports. Indeed, Shell has decided to convert its Clyde Refinery and Gore Bay Terminal into a fuel import terminal.

Planning at Sydney must therefore accommodate supply chain infrastructure developments needed to meet increased imports and competition. Shell runs its own infrastructure. The only common-use liquids berth is at Port Botany, owned by the Sydney Ports Corporation. Storage is supplied by a company called Vopak, with distribution from its facilities to the airport controlled by Caltex. The hydrant system at Sydney Airport itself falls under the Joint User Hydrant Installation (JUHI), which has stringent equity participation guidelines.

In other words, a number of partners with an effective monopoly have to be brought together to invest in the capacity upgrades that are essential to air traffic growth at Sydney. It is a complicated process, especially given that each partner is looking for an effective and quick return on any investment.

BARA worries that “the involvement of multiple private and government entities could make [infrastructure investment] a challenging exercise.” It has argued for greater competition on the Caltex pipeline and at the airport itself to promote investment and the greater likelihood of adequate fuel supply capacity in the future. At present Caltex only allows access to its pipeline for about 5.5 days per month.

IATA shares BARA’s position that facilitating access of new entrants to the key fuel infrastructure at Sydney would bring more effective competition in the jet fuel supply market. A more competitive market will benefit airlines, passengers, and shippers alike. The relevant authorities are still debating the argument.



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