Both Ampol and Viva will keep their refineries open to 2027, with the option to extend by three more years and will receive payments only when refining margins are particularly tough. The deal includes a minimum stockholding requirement.
At its highest estimate it will cost A$2 billion.
Tony Wood of the Grattan Institute typically didn't hold back, agreeing with the minimum stockholding measures but suggesting the payments to refiners were pointless.
"This is about an extraordinarily expensive subsidy for a small number of jobs that's not going to do very much," he told Energy News this afternoon.
He also believes the fuel security worries are overblown, suggesting Australia suffered from more fuel shortages when it had greater domestic capacity some decades ago, before the era of the Asian mega-refineries.
"I always thought there was a case for short term targeted support for those whose businesses had been knocked around by COVID-19 (but)... Cost per employee it's bloody expensive."
Dr Andrew Davies of the Australian Strategic Policy Institute, which has covered refining capacity and fuel security for many years, praised the measure.
"I think it's a step that will help stop a significant national vulnerability from getting worse," he told Energy News.
"Liquid fuels for transport, especially aviation, will be much harder to replace fossil fuels for electricity generation.
"So we're stuck with them for some time yet.
"Being almost entirely dependent on offshore refineries would be precarious."
Meanwhile the Australian Workers Union welcomed the move given the mid-term saving of a cumulative 1,250 jobs.
"The security of the production payment provision, along with the investment to make cleaner fuel, will underpin longevity for both refineries. Today's announcement will save thousands of jobs, both directly at the refineries and indirectly through jobs supported in the community," national secretary Dan Walton said.
"Importantly for the national interest, the ongoing viability of our refineries mean the skills of highly specialised technicians will be preserved - skills that will be needed as we transition toward a future of hydrogen and renewables.
Credit Suisse analyst Saul Kavonic said "once the government announced the refinery rescue package last year they would have looked foolish if they had allowed the policy to only apply to a single remaining refinery so they were clearly going to raise the stakes to keep both refineries open."
He said any further losses of refining capability or manufacturing jobs was "politically unpalatable".
