Southern Oil’s new hydrotreater plant can blend crude oil from waste and green resources to create renewable fuel, bringing new possibilities to Australia’s fuel market.
The employees at Southern Oil are passionate about the environmental and economic efficiencies of turning waste resources into a valuable product. By opening Australia’s first fuel refining plant to process crude oil from waste and green sources in May, they are truly practising what they preach.
The new $2.2-million hydrotreater plant was built on Southern Oil’s existing refinery site in Wagga Wagga. Its addition puts the New South Wales town firmly on the alternative fuels map in Australia.
The original processing facility was opened in 2001. It collects and re-refines about 8 per cent of Australia’s annual waste lube oils from engines, hydraulics and gear oils from Hunter Valley mines, vehicle service centres and other commercial businesses. The first plant produces no waste, and the end product has a significantly smaller carbon footprint than crude base oils.
Wagga has a sister plant, the Northern Oil Refinery in Gladstone, Queensland. These are the only facilities in the country producing a fully re-refined lube oil accredited for global use by a major international oil company. Together they have the potential to process 38 per cent of Australia’s waste lube oil.
Southern Oil’s opportunity to consolidate its environmental credentials came two years ago, when London-based Hydrodec approached it about taking over its hydrotreater facility in Young, two hours up the road. Hydrodec wanted to develop its UK and US assets based on the New South Wales technology, but considered it too small to be viable.
“We were able to cut a deal to bring the plant to our Wagga refinery site and keep it operating,” says Tim Rose, Southern Oil’s CEO. The plant’s intellectual property, originally developed by the Commonwealth Scientific and Industrial Research Organisation (CSIRO), now belongs to Hydrodec, who licenses its technology.
After moving the plant to Wagga in March, it took six weeks to reconstruct it on site. Southern Oil officially took over the hydrotreater in April and it was formally commissioned on 8 May. It has five employees, three who came from Hydrodec, making a total of 40 staff at the site. Southern Oil and Hydrodec continue to work together to develop its capabilities.
How the Technology Works
With the drive for renewable fuel, a number of small, alternative crude oil producers have set up around Australia. These innovators produce crude from sources including algae, wood and agricultural waste, human waste and processed tyres.
“These technologies can create crude oil, but it usually contains significant impurities,” says Tim. “These affect the combustion efficiency and storage stability of the end product.”
The hydrotreater uses a process called hydrogenation. This extracts the impurities, such as oxygen and nitrogen, and replaces them with hydrogen to produce a cleaner-burning, stable petroleum product.
“The result is a direct alternative to the traditional fossil fuels found in cars, trucks and planes across Australia,” explains Tim.
The hydrotreater offers domestic refining capability to local producers of bio and green crude oils. Although their technologies are viable, previously there hadn’t been a refinery to process their products and enable production on a commercial scale.
“Now they have access to a refinery, while we can test the market and supply chain as we look to invest further in a new industry for Australia,” adds Tim.
Currently, the main customers for the fuel are small businesses using it for stationary engines and boilers. However, Tim says that the next step would be to process it for the general transport market.
Catering to a Refined Market
Southern Oil is eyeing the Royal Australian Navy as a viable market for its aviation fuel. At full operational capacity, the hydrotreater could easily supply the Navy’s annual demand for jet fuel. Southern Oil is focusing on producing a military-specification product, but that comes with certain challenges. For instance, it requires extensive testing and a lengthy approval process with not only the Australian defence authorities, but NATO and relevant US agencies as well.
“An added complication to supplying for the military and general aviation sector is that you can get accredited for a one source crude, but not a blended feedstock,” explains Tim. “We need to convince the buyers that we have a process for creating a suitable fuel from a variety of sources. Then we need approvals to use it.”
As a result, it could be up to five years before the hydrotreater fuel is approved for military use.
In the meantime, Southern Oil is also working with aviation companies, such as Qantas, GE and Boeing.
“They’re showing the most interest because they have set targets for using certain amounts of biofuel in their planes,” says Tim. “If we can meet the military specification, we can meet everything else for other users.”
Tim also sees the hydrotreater becoming a niche supplier, catering to strategic industries like mining and agriculture.
“Those businesses are about the size to justify building a small refinery on site, and they are expressing an interest in green fuels,” Tim says.
Southern Oil continually focuses on research and development. In terms of the hydrotreater, Tim says the research team is working on “a Swiss army knife of refining” to create one refinery for a variety of crudes. At the same time, the development team is investigating other opportunities for this technology in the end market, such as plastics, cosmetics and textile industries.
“Like any business, we identify needs or gaps in the marketplace and apply our skills, knowledge and innovation to deliver a commercial solution,” says Tim. “We want to be thought leaders in the sector and deliver better standards and practices that achieve better business and environmental outcomes.”
The Plant’s Future
Underpinning Southern Oil’s enthusiasm for the hydrotreater is its commitment to the environmental aspect of its business. Tim says his team gets annoyed when resources that could be turned into something valuable go to waste. He firmly sees the company in the waste management space.
Southern Oil believes the hydrotreater is the missing link between the alternative fuel promise and conventional fuel delivery. It is a commercial refinery, with the ability to supply up to 6 million litres of military and commercial grade fuel each year at full capacity. Along with its sister plants, it can provide a reliable domestic source of fuel and reduce the need for oil imports in Australia.
“In the case of alternative fuels, you just have to look to the challenges Australia faces in its fuel security and the potentially significant implications these challenges have for the nation’s economy and defence,” says Tim.
Currently in Australia, the majority of feedstock for domestic crude refineries is imported. The country is reliant on secure shipping lanes and a constant supply, which could easily be affected by a supply disruption.
“As a country we don’t stockpile fuel or oil, and available supply can be as little as a few days,” says Tim. “But in the hydrotreater, we have the technology to reverse this trend and produce clean, green fuels from domestic renewable sources.”
Tim emphasises that the company’s investment in the hydrotreater is only the first step in its ambitions for alternative crude processing. Southern Oil hopes to hone the technology to the point where it can build either a full-scale biofuel refinery at its existing sites in Wagga or Gladstone, or a couple of smaller refineries close to feedstock and end markets.
“Our goal is to develop a large-scale fuel refinery based on alternative crudes within five years,” Tim says. “But to support that major investment, we need to prove market demand and ensure a genuine supply chain.”
That investment would be in the region of $150 million. To justify that outlay, Southern Oil hopes to land a 10-year supply contract with the Australian Defence Force. This would secure an end market. However, it needs a coordinated approach between feedstock producers, the end-users and regulators to allow it to progress in that direction.
“The future is exciting,” says Tim. “We’ve got a good refining pedigree and committed investors. We’ve got the will, the technology and the people. We just need a few things to fall into place to make this happen.”