In part 1 of this post we looked at various Taiwan scenarios of US think tanks.
So what does all this mean for Australia’s fuel imports from East Asia?
Diesel from China and Taiwan
In all scenarios Diesel imports from China and Taiwan would almost immediately stop, with tankers in transit being the last ones to arrive at Australian ports. In the last 4 years, imports were around 360 ML/month.
Fig 14: Diesel imports from China and Taiwan
How does this compare to the storage?
Fig 15: Diesel storage over time
The photo in Fig 15 shows 3×30 ML new (strategic) diesel tanks in the Viva refinery in Geelong.
Under a previous Liberal (conservative) Government:
January 2021
The Boosting Australia’s Diesel Storage Program will provide up to $260 million in competitive grants over three years to 2023-24…..to construct new diesel storage that will result in an estimated 780ML of additional diesel storage being kept onshore. This quantity is estimated to be required for industry to meet the proposed minimum stockholding obligation by 2024
https://business.gov.au/grants-and-programs/boosting-australias-diesel-storage-program
The grant winners are:
• Stolthaven Australia (126 ML, Newcastle NSW);
• Coogee Chemicals (100 ML, Kwinana WA);
• Park (30 ML, Port Kembla NSW);
• Park (30 ML, Newcastle NSW)
• Viva Energy Refining (90 ML, Geelong VIC);
• Terminals (80 ML, Outer Harbor, Adelaide SA);
• Qube Holdings (110 ML, Lumsden Point, Port Hedland WA);
• Qube Holdings (73 ML, Port Kembla NSW)
• Airport Development Group (80 ML, Darwin NT); and
• Ampol Limited (60 ML, Newport VIC).
https://www.shippingaustralia.com.au/diesel-storage-capacity-grant-winners-announced/
So this newly built storage would last 780 ML /360 ML * 30.4 days = 66 days to cover the loss of diesel from China and Taiwan.
Let’s have a look which route Chinese tankers are currently taking to get to the East Coast:
Fig 16: Chinese product tanker Qingdao – Gladstone (Queensland) – 15 days
50,000 mt = 390 kb Diesel/kerosine = 61 ML
https://www.marinetraffic.com/en/ais/home/centerx:125.4/centery:9.7/zoom:3
The route taken here is via the Philippine Sea and the Bismarck Sea east of PNG. This would be the same for tankers from South Korea and Japan which bypass the sea around Taiwan. However, the problem will be crude oil imports from the Middle East which now go through the Strait of Malacca and the South China Sea as shown on the above map.
Diesel from South Korea
Fig 17: Diesel imports from South Korea
How do Australian diesel imports from South Korea compare to South Korea’s diesel exports? Which share do they have?
Fig 18: South Korea’s fuel exports (Yearbook of Energy Statistics 2023, p 91)
https://www.keei.re.kr/board.es?mid=a20103000000&bid=0033&list_no=119953&act=view
Fig 19: Australian diesel imports compared to South Korean diesel exports
Up to 2020, Australian diesel imports were about 10% of South Korean diesel exports. This share jumped to around 30% in the last 3 years.
We should not forget that South Korea is heavily reliant on crude oil imports from the Middle East (2024: 72%). However, there were some changes since 2017. Imports from the US increased while imports from Iran went down to zero by 2020. It could be that they are now included in “ME other” which should also contain Iraq because there are no other ME countries which could export so much oil.
Fig 20: South Korean crude imports by country
South Korea’s legislation on dealing with oil emergencies is summarized by this IEA article:
Korea’s legislation on oil security
31 July 2020
- 2017 Petroleum and Petroleum Substitute Fuel Business Act (PAPSA)
- 2016 Energy Act (EA).
Together both acts provide the legal framework for Korea’s oil emergency response.
The PAPSA provides for two levels of emergency measures. The first level is triggered when the uninterrupted supply of oil and the satisfaction of Korea’s oil demand is threatened by events in Korea or abroad or when disturbances in the oil market threaten Korea’s public order or national economy
An aggravated energy emergency exists when the uninterrupted oil supply is threatened in Korea or abroad by war, natural disasters or similar situations and it is deemed impossible to stabilize the situation by means of orders enacted pursuant to article 21 PAPSA and as noted in article 22 (1) PAPSA.
https://www.iea.org/articles/korea-s-legislation-on-oil-security
Fig 21: South Korea’s oil stocks 206 days of next oil imports
That’s impressive. So no problem? These are excerpts from PAPSA:
CHAPTER V COORDINATION OF SUPPLY AND DEMAND OF PETROLEUM IN EMERGENCY
Article 21 (Order, etc. Issued to Stabilize Supply and Demand of Petroleum)
(1) ……the Minister of Knowledge Economy may issue orders to petroleum refinery business operators, petroleum export-import business operators, petroleum sales business operators, petroleum stockpiling agents….. with respect to any of the following matters in order to stabilize the supply and demand of petroleum:
…
5. The export and import of petroleum, including methods of importing petroleum and petroleum exporting countries;
(1)
Article 22 (Measures to Ration Petroleum, etc.)
(1) Where the supply and demand of petroleum has significant problems or is feared to do so due to war, incident, natural disaster or the occurrence of a situation corresponding thereto or the aggravation of the petroleum situation in Korea and abroad and it is deemed impossible to stabilize the supply and demand of petroleum through only the orders provided for in Article 21, the Minister of Knowledge Economy may take any of the following measures, as prescribed by Presidential Decree:
1. The ration of petroleum;
2. Restrictions or ban on the transfer and acquisition of petroleum;
https://elaw.klri.re.kr/eng_service/lawView.do?hseq=22063&lang=ENG
Excerpts from the Energy Act:
Article 8 (Formulation of Contingency Energy Supply Plan)
(1) The Minister of Trade, Industry and Energy (MOTIE) shall formulate a contingency energy supply plan (hereinafter referred to as “contingency plan”) in case of a serious disruption in energy supply and demand.
(3) The contingency plan shall include the following:
3. Matters concerning measures for the utilization of energy in reserve in case of emergency;
4. Matters concerning measures for the adjustment of supply and demand, such as the allocation, rationing, etc. of energy in case of emergency;
(4) The Minister of Trade, Industry and Energy may take necessary measures, as prescribed by relevant statutes and regulations, such as imposing restrictions on energy use, in case of a disruption in energy supply and demand resulting from any change in either domestic or overseas energy market.
https://elaw.klri.re.kr/eng_mobile/viewer.do?hseq=61371&type=sogan&key=13
South Korea tries to stay out of any conflict around Taiwan. But this may not be possible.
The implementation of the above measures will have to be seen in the context of South Korea’s border with North Korea.
War in the Taiwan Strait may mean war for North, South Korea
31 Jan 2023
Notable in this regard is the southward movement of China’s North Sea Fleet and East Sea Fleet. Some wargames have concluded that China would gain victory if it can swiftly move those two fleets (based in Qingdao and Dinghai, respectively) to the Taiwan Strait.
But the US ally that’s closest to those fleets is South Korea. US aircraft at Osan Air Base and Kunsan Air Base are in a position to counter and block those fleets’ southward movement.
“During a conflict in the Taiwan Strait, Jeju-based US ships, submarines and aircraft could easily intercept North Sea Fleet units heading south and harass the flank of the East Sea Fleet,” Suchyta wrote in the report.
Taken together, all of this suggests that South Korea stands a very real risk of being dragged into a war in Taiwan regardless of its intentions.
If the US deploys US Forces Korea (USFK) or other military forces to South Korea to send into a conflict in Taiwan, China is very likely to retaliate. In particular, a Chinese retaliatory strike against a USFK base or Jeju Naval Base would amount to an attack on South Korean territory, raising the risk of things escalating into an armed clash between South Korea and China.
The matter isn’t just restricted to South Korea either. North Korea has indicated its full support for China’s position on the Taiwan issue, and its Treaty on Friendship, Cooperation and Mutual Assistance with China includes provisions that would automatically trigger its involvement.
https://english.hani.co.kr/arti/english_edition/e_international/1077710.html
The Heritage Foundation also emphasizes South Korea’s main problem:
South Korea Cannot Afford to Sit Out Taiwan Contingencies
October 30, 2024
North Korean Threat Looms Large for Seoul
While other Indo–Pacific democracies are predominantly focused on the growing Chinese threat, South Korea prioritizes its security posture against North Korea, which poses an existential threat. While South Korean military forces have participated in off-peninsular operations in the past—such as Vietnam, Afghanistan, and Iraq—South Korean officials rebuffed possible involvement in a Taiwan crisis.
https://www.heritage.org/china/report/south-korea-cannot-afford-sit-out-taiwan-contingencies
So it is very likely South Korea’s MOTIE will restrict the export of fuels as the conflict can spread quickly
Diesel from Japan
Fig 22: Diesel imports from Japan
Fig 23: Japan refinery production
As the graph shows, Japanese refineries have been closing due to declining oil demand (shrinking population, increasing fuel efficiency, conservation efforts, excellent rail system). This trend is likely to continue. But diesel demand is resilient, expected to decline by only 0.3% in 5 years
https://www.argusmedia.com/es/news-and-insights/latest-market-news/2317307-japan-sees-oil-product-use-falling-over-next-five-years
Around 25% of Japanese refinery production is diesel (gas oil in statistics) and from that 14% are exported with a declining trend over the last 10 years.
Fig 24: Japan crude oil imports by country
Data are from here: https://www.stat.go.jp/english/data/nenkan/74nenkan/1431-11.html
Given the oil import vulnerabilities shown in Fig 24, Japan is very strict with maintaining stockpiles of oil, by both the government (last resort) and the private sector.
From the International Energy Agency (IEA) which monitors oil stocks of OECD countries:
Fig 25: Oil stocks in Japan
https://www.iea.org/articles/japan-oil-security-policy
We see Japan’s oil stocks are as impressive as South Korea’s. More details with stock volumes in Kl and the location of storage sites can be found on the website of the Japan Organization for Metals and Energy Security (JOGMEC), a Japanese government Independent Administrative Institution:
https://www.jogmec.go.jp/english/stockpiling/stockpiling_10_00001.html
Japan’s oil emergency legislation
Again from the IEA:
The Japanese oil supply emergency regime is primarily governed by
- 1980 Petroleum Supply and Demand Adjustment Act (122/1973) (PSDA),
- 2002 Oil, Gas and Metals National Corporation Law (94/2002) (OCL)
- 1975 Oil Stockpiling Act (96/1975) (OST).
More specifically, article 9(1) PSDA authorises the Minister of Economy, Trade and Industry to order commercial entities to reduce the consumption or distribution of oil products. Possible measures include restrictions on selling methods or limited opening hours (article 9(1) PSDA). When implementing the provisions of the PSDA special attention should be paid to the interests of vulnerable groups of the population (article 9 PSDA).
https://www.iea.org/articles/Japan-s-legislation-on-oil-security
Petroleum Supply and Demand Adjustment Act
Act No. 122 of December 22, 1973
Article 1 The purpose of this Act is to optimize the supply and demand of oil by taking measures to secure proper oil supply and reduce oil use in order to ensure the stability of the lives of the citizens and the smooth operation of the national economy in case there is a significant shortage in supply of oil to Japan and where a disaster in the country causes a significant shortage in the domestic supply of oil.
(Allocation or Rationing)
Article 12 (1) When it is found extremely difficult to overcome the circumstances prescribed in Article 4, paragraph (1) through the measures prescribed from Article 5 through the preceding Article, necessary matters concerning the allocation or rationing of oil, or restriction or prohibition of production, use, transfer or acquisition of oil may be prescribed by Cabinet Order.
https://www.japaneselawtranslation.go.jp/en/laws/view/3001/en
National Security Strategy of Japan
December 2022
Backed by these military capabilities, China has been intensifying its activities across the entire region surrounding Japan, including
- the East China Sea, particularly the exterritorial water around Senkaku Islands, the Sea of Japan, and the western Pacific Ocean including the areas around the Izu and Ogasawara Islands, extending beyond the so-called First Island Chain to the Second Island Chain
- as well as increasing military pressure on Taiwan and promoting its militarization in the South China Sea.
- ships belonging to the China Coast Guard have repeatedly intruded into Japan’s territorial waters in the areas around the Senkaku Islands. Also, Chinese navy vessels have been seen navigating in Japan’s territorial waters and contiguous zones around the Southwestern Islands
Furthermore, in order to maximize effective use of the current defense equipment, Japan will further enhance the effectiveness of defense capabilities by improving mobility, securing ammunition and fuel, and hardening major defense facilities as a top priority.
It is believed that through the series of activities around Taiwan, China seeks to create a fait accompli in the situation where Chinese military is continuously operating, and improve its practical capabilities. Moreover, China has launched nine ballistic missiles in August 4, 2022, five of which landed within Japan’s Exclusive Economic Zone (EEZ). This was perceived as a threat to local residents. China thus has intensified its coercive military activities around Taiwan, and concerns about the peace and stability of the Taiwan Strait are rapidly growing not only in the Indo-Pacific region but also in the entire international community
To ensure the smooth activities of the SDF and U.S. forces, and others, measures will be taken to develop arrangements for transportation and storage of SDF ammunition and fuel, …..
https://www.cas.go.jp/jp/siryou/221216anzenhoshou/nss-e.pdf
From here: https://www.mofa.go.jp/fp/nsp/page1we_000081.html
Japan takes a possible Taiwan crisis very seriously:
Japan retools evacuation plan for western island chain in event of emergency or attack
1 April 2025
Miyako Airport, Okinawa
An updated plan recently released by the Japanese government details how and where it will move 120,000 people from the country’s long chain of westernmost islands in theevent of a military attack or other emergency.
The 110,000 residents of the Sakishima island chain’s five municipalities would relocate to 32 municipalities in southern Japan, according to the plan posted Thursday on the Cabinet Secretariat Civil Protection Portal site. The plan also accounts for 10,000 tourists who may be visiting during a contingency.
China’s military on Tuesday announced another round of large drills by navy, air, ground and rocket forces around Taiwan, The Associated Press reported.
The 44-island Sakishima chain, part of Okinawa prefecture, stretches southwest of Okinawa island to within 75 miles of Taiwan. Japan in 2023 opened a missile base on Ishigaki island in the chain and deployed Type-12 surface-to-ship guided missiles and Type-03 surface-to-air guided missiles there as a hedge against Beijing’s increased military presence in the region.
https://www.stripes.com/theaters/asia_pacific/2025-04-01/sakishima-evacuation-japan-taiwan-china-17327737.html
So if an emergency were to arise and oil rationing introduced by a Cabinet decision the likelihood of fuel exports in such a situation would be very low.
Conclusion
In case of a military confrontation around Taiwan (no matter which scenario) Australia should not take it for granted to be able to import diesel from the 4 Asian countries mentioned above
To be continued. Part 3 will look at emergency measures in Australia
