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New Zealand pre-ordered more oil stocks just before Russia invaded Ukraine, boosting government reserves this month – at a critical time.
The New Zealand government and oil companies together hold more than 1.7 million tonnes of oil in tanks, ship holds and international ticket contracts acquired just in time for international action last week.
The Department for Business and Innovation told Newsroom last night that the new ‘notes’ were purchased at January prices, before governments around the world agreed to ban oil hoarding. “The International Energy Agency has asked member countries to delay stockpiling to contribute to its energy security measures,” a ministry spokesperson said.
Brent crude was selling for $85 a barrel when the government agreed to the purchase in mid-January; two months later, as Russian missiles rained down on kyiv, the price soared above $120 a barrel.
In mid-January, diesel was imported at 95 NZ cents per liter and regular petrol at 93 cents; now import prices are at NZ$1.36 and NZ$1.22 respectively – and pump prices have hit new highs.
After agreeing last week to release 65,000 tonnes of oil as part of an international deal to support global fuel supplies, the government still holds 837,000 tonnes of oil in note contracts – effectively options to release this oil.
He agreed last week to release tickets for 184,000 barrels of crude oil held in Spain and nearly 299,000 barrels of diesel held in the UK. It is unprecedented – the second such emergency release agreed by the International Energy Agency in a month – although some of the 31 member countries have declined to participate.
Channel Infrastructure closed the Marsden Point oil refinery, but its chief executive, Naomi James, told Newsroom Pro editor Jonathan Milne during an episode of Pro Talks that the company’s tanks were now available to store reserves of refined oil to move New Zealand through Ukraine. crisis and beyond.
“One of the changes brought about by the transition is that we are less dependent on a single refinery than before. And our supply will come from a range of refineries in the Asian region.”
– Naomi James, speaking in Newsroom Pro Talks
Indeed, beyond the 837,000 tonnes held by the government under overseas note contracts, New Zealand’s major oil companies physically hold around 900,000 tonnes in tanks on New Zealand soil and on ships bound for New Zealand.
It means that this month, for the first time in a year or more, New Zealand is complying with its international agreement to hold more than 1,448,000 tonnes of oil in reserve – enough petrol, diesel and jet fuel to run New Zealand for 90 days. .
The big fuel purchase, which nearly doubled government stocks this month, was timed in response to the refinery closure.
But it is also timely because of the ensuing international agreement to stop buying other stocks. In the last two International Energy Agency collective action releases, not all countries released oil stocks, despite this being an authorized collective action by the agency.
“There has been a great deal of volatility in global oil markets since the invasion and this new action, coupled with the United States’ decision to release 180 million barrels of oil over the next six months, will help bring some relief. certain certainty in the market.”
– Megan Woods, Minister of Energy
“Some refused because they argued that the current emergency did not meet their legislative requirements for the release of oil stocks,” the MBIE spokesman said.
Energy Minister Megan Woods said New Zealand’s second release of emergency oil stocks showed its commitment to helping stabilize global energy markets. “There has been a great deal of volatility in global oil markets since the invasion and this new action, coupled with the United States’ decision to release 180 million barrels of oil over the next six months, will help bring some relief. certain certainty in the market,” she said.
Oil companies will now import New Zealand refined oil from various countries, including Singapore, Korea and Japan, which James said would make the country less vulnerable to fuel shortages.
Channel Infrastructure – as the former refining company is now known – has already struck deals with its biggest customers and shareholders, Mobil, Z Energy and BP. “We have signed agreements with the oil companies for a total storage of 280 million liters of products,” James said.
Of this, 180 million liters are shared by companies and 100 million liters are private. “To put this into context, the 100 million private liters is equivalent to approximately four days of cover for New Zealand, based on 2019 pre-Covid demand. This is with the capacity to increase available storage if necessary.”
“The change is really that we source from a range of refineries around the world,” she said. “Our customers primarily source from refineries in Asia, to supply New Zealand. This was already happening for around 30% of our fuel supply, even when the refinery was running. So one of the changes with the is that we are less dependent on a single refinery than we were before, and our supply will come from a range of refineries in the Asian region.
“We should be able to count water storage as part of our overall storage levels, as Z takes control of the cargo from the moment it is loaded, and can therefore steer the ship as required – i.e. speed up, slow down, take another route.”
–Julian Hughes, Z Energy
New Zealand’s largest oil company, Z Energy, is both Channel Infrastructure’s biggest shareholder and biggest customer for its imported refined oil.
Julian Hughes, general manager of supply at Z Energy, said two industry vessels had already successfully unloaded at the Marsden Point import terminal since the refinery closed. The fuel could then be sent through the RAP pipeline from Channel to Wiri, or loaded into tanks or trucks. Three more tankers were due to unload this week, he said.
At any given time, Z calculated he would have four shipments on the water, Hughes said, which equates to 185 million liters or 148,000 tonnes of product. With an average voyage time of 22 days, there would be a Z ship arriving in New Zealand approximately every 5.5 days.
“We should be able to count water storage as part of our overall storage levels, as Z takes control of the cargo from the moment it is loaded, and can therefore steer the ship as required – i.e. speed up, slow down, take another route,” Hugues said.
“Z’s analysis shows that if you count water storage (all tankers, not limited to territorial waters or those of the exclusive economic zone), we could comfortably meet the minimum fuel storage requirements proposed by the government.”
He said Z typically targets gasoline and diesel inventory at around 50% tank capacity, as it strikes a good balance between a safe and reliable supply chain and efficient operation. This would cover the company’s needs for 35 to 40 days, including stock on the water.
BP spokesman Gordon Gillan was less forthcoming. He would say that only the company had not significantly changed its average inventory under the import-only model. “BP is well placed to ensure that we continue to provide security of supply to all of our customers across New Zealand,” he said. “We have a dedicated local sourcing team and are experts in reliably sourcing quality products from international refineries and terminals for our nationwide terminal infrastructure.”
There have been calls from Social Credit chief Chris Leitch and some unions to keep the Marsden Point refinery open, to refine Taranaki crude oil. But Naomi James said it was not viable to refine the small quantities of light crude oil from Taranaki in New Zealand, as the refinery was designed for much larger quantities of imported heavy crude oil.
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