The future of NZ's fuel supply

December 9, 2021

Z Energy (Z) has released a report titled Our future fuel supply, which outlines how New Zealand will get its fuel as the country stops importing and processing crude oil at Marsden Point and moves to an import-only, finished product model.

Following last month’s final investment decision by Refinery NZ (the operator of New Zealand's only oil refinery) to revert to an import-only terminal from April 2022, there has been considerable analysis from industry experts and market commentators as to whether New Zealand will be more vulnerable to fuel supply disruption as the country moves to an import-only model.

Z’s report released today supports its position that moving to a refined product fuel supply will improve flexibility and resilience of the supply chain, improve the industry’s ability to respond to changes in the domestic market, help to reduce New Zealand’s greenhouse gas emissions and level the playing field in the domestic market.

"As a highly mobile nation, fuel is an essential product in supporting our economy and everyday lives of New Zealanders. Although the demand for liquid ground fuels will steadily reduce with the advancement of alternative technologies, it is forecast to be part of the picture for decades to come and remains vital as part of a transition to a low-carbon future," says Julian Hughes, GM Transition.

"Instead of importing crude oil from the Middle East, a region which has faced frequent political instability, New Zealand will instead predominately acquire its refined fuel from Asia, including Singapore, Japan and Korea.

"A refined fuel import supply chain, sourced from multiple refineries in multiple countries, will provide more options from where we source product and is therefore more resilient to most credible fuel disruption scenarios.

"There will also be more frequent deliveries of finished product to New Zealand – we estimate around 175 tankers arriving annually. This means a tanker will be discharging into our domestic supply chain every two days. That is considerably more tankers than the industry currently imports and each carrying fuel that is ready to be delivered to customers," continues Julian.

While refining crude oil domestically has provided a level of comfort to governments and consumers alike, that oil still needs to be refined and distributed. Import shipments of refined fuels provide more flexibility as ships can be redirected to other ports if needed and arrive with the finished product ready to use immediately. It also offers more flexibility to import the specific fuel type New Zealanders need, without having to process and refine the entire crude oil barrel.

"If we were operating with an import-only model through Covid, we could have reduced the amount of jet fuel we were bringing in as part of the crude oil barrel while continuing to bring in sufficient petrol and diesel supply for our customers," says Julian.

To help allay fuel supply concerns as New Zealand transitions out of refining, the report outlines a number of steps industry and government can take which include supporting domestic biofuels production at Marsden Point; establishing a national stockpile of fuel; and mandating crisis management exercises.

Julian added that Z views the closure of the Marsden Point Refinery as an opportunity for greater efficiencies and is confident that fuel security can be maintained, if not enhanced post-refinery, for the benefit of Z customers and New Zealanders alike.

Read Z Energy: Our future fuel supply