This time last year, Australia was in the grip of a shortage of Diesel Exhaust Fluid (DEF) – commonly referred to as ‘AdBlue’. The shortage had its genesis in a global supply issue created by sharp rises in natural gas supply prices for European producers of Technical Grade Urea (TGU) – the granular compound that is blended with water to make AdBlue. These producers responded to the higher gas input prices by lowering production output – and hence a supply shortage emerged in Europe that rapidly spread to other world markets given the significant contribution of European producers to total global supply.
Australia’s problems occurred when China – the sole supplier of more than 80% of Australia’s TGU demand at the time – ceased exports to protect its own supply in the wake of the global supply situation. These issues were ultimately resolved with Australian Government leadership and comprehensive industry cooperation over the 2021 Christmas/New Year period, to ensure that scarce supplies of DEF were managed in such a way as to keep Australia’s diesel trucks and buses moving.
The measures put in place by the Australian Government in early 2022, were openly acknowledged as resolving DEF supply in the short term only. Armed with a detailed knowledge of the factors that had led to the supply shortfall, the Federal Government began working with industry on potential longer-term solutions. These solutions included opportunities to reduce Australia’s vulnerability to near wholesale reliance on TGU and DEF imports.
In September 2022, the Federal Minister for Energy and Climate Change (the Hon. Chris Bowen MP), announced that the Australian Government would invest $49.5M over four years to improve security of supply of DEF in Australia. This funding would be used to advance three initiatives, namely:
- A government controlled strategic stockpile of 7500 tonnes of TGU providing an additional five weeks of supply beyond industry stock levels in case of a supply shortage.
- A competitive grants program to support sovereign capability and manufacturing projects that will look to produce TGU domestically.
- Collection of voluntary data provided by industry to provide market awareness of TGU and DEF domestic stocks.
The critical importance of reducing Australia’s vulnerability to imported supplies of TGU is emphasised by analysis of the sources of Australia’s TGU supply. In the six-month period to 31 October 2022, Australia’s consumption of DEF averaged 4 million litres per week (derived from just over 1500 tonnes of TGU per week). During this period, TGU imports accounted for 100% of Australian TGU demand. Just three countries – China (45% of all imports), Indonesia (34% of all imports) and Japan (11% of all imports) – accounted for 90% of total demand recorded over the six-month period.
Just prior to the 2022 Christmas break (i.e. 23 December 2022), the Australian Government released details of a competitive grants program to incentivise the domestic manufacture of TGU. The program has set aside a total of $16.15M in grant funding to assist businesses to invest in projects for either the manufacture of TGU, a TGU equivalent, or DEF for sole use in the Australian market. To be eligible for a grant under this program, the project must:
- Be located in Australia
- Be a new project, which has not already commenced
- Be for domestic manufacture and supply to the Australian market of TGU, TGU-equivalent product or DEF from domestic feedstocks (e.g. natural gas, ammonia, CO2), or imported feedstocks which are reliably available in Australia
- Produce TGU which meets the ISO 22241 specification for the production of DEF or produce a TGU-equivalent product that demonstrates it can be used commercially as a DEF either, as specified in compliance with ISO 22241, or as certified by OEMs for use as a DEF.
Importantly, businesses wishing to apply for a grant need not be existing TGU or DEF manufacturing businesses. The grants are open to all interested businesses, including Australian fuel businesses that may have an interest in investing in new projects for the manufacture of TGU or DEF for the Australian domestic market.
Full details of the Grants Program and business eligibility – including details on how to apply for a grant – can be accessed at: https://business.gov.au/grants-and-programs/maintaining-our-supply-of-diesel-exhaust-fluid-program.
Importantly, and somewhat surprisingly given that the details of this program were released on the last working day before Christmas 2022, applications close at 5pm (Canberra Time) on 31 January 2023.
ACAPMA welcomes this initiative and is committed to working with the Government and all industry players to prevent a repeat of the 2021/22 DEF supply situation in the future.
ACAPMA
Source: https://acapmag.com.au/2023/01/government-grants-for-adblue-supply/.
