In a newspaper report this morning, The Age cited “government sources” as saying the plan was part of a plan to boost competition and lower petrol prices.

The newspaper also quoted assistant federal treasurer Chris Bowen as backing the proposal.

“I see this as a joint project between us and the Australian Competition and Consumer Commission,” he was quoted as saying.

Mobil closed the Port Stanvac refinery in 2003, saying it was too expensive to refine petrol there.

Before its closure in 2003, the Mobil-owned facility was producing about 10% of Australia’s transport fuel.

Both the state and Howard governments have wanted to see the plant re-opened but Mobil decided it was not viable in the long term.

The South Australian Government has since earmarked the old refinery site as the preferred location for its proposed desalination plant.

Asbestos and toxic chemicals have also been buried at the site, meaning a clean-up could be very expensive.