A fuel industry bill which will put in place minimum stockholding regulations is being welcomed by members of the road freight sector.
The Fuel Industry (Improving Fuel Resilience) Amendment Bill was introduced to Parliament on June 1 and will apply to the five fuel companies that have access to storage facilities – BP, Gull, Mobil, Tasman Fuels and Z Energy.
The combined minimum stockholding levels would equate to 28 days use of petrol, 24 days of jet fuel, and 21 days of diesel on average every month.
It follows a suite of initiatives announced by the Government in November last year to strengthen New Zealand’s fuel sector with more supply resilience.
Key to the plan is developing an obligation for fuel companies to store a minimum amount of fuel onshore that can be drawn on in an emergency.
Energy and resources minister Megan Woods says the bill will ensure “sufficient petrol, diesel and jet fuel in New Zealand to weather major disruptions to our fuel supply”.
“Although the risk of such a disruption is very low, it could cost the economy hundreds of millions to billions of dollars,’ Woods says.
The Government also plans to buy and hold 70 million litres of diesel stocks in New Zealand which is around seven days’ worth.
This recognises the importance of diesel for running emergency services and transporting food. It would require setting up agreements with the fuel industry and storage providers.
In March and in December last year, jet fuel arriving in the country tested off-spec, which caused fuel companies and airlines to activate contingency arrangements to minimise disruptions.
Having more stocks at strategic locations like Auckland Airport will reduce the risk of such incidents happening again, Woods says.
The bill also includes introducing regulation-making powers so that the obligation can be adjusted as needed.
The powers could include, for example, introducing new stockholding requirements for different fuel types or different locations, or specifying requirements for disclosing information relating to fuel supply resilience.
“This would enable the government to have a clearer oversight of New Zealand’s fuel resilience and build in the flexibility we need to adapt the stockholding obligation as energy and transport trends change,” Woods says
The bill and the associated regulations are expected to come into effect as early as April 1, 2024.
Diesel stockholdings ‘vital’
The National Road Carriers Association (NRC) road freight body says it supports the bill which will help minimise any potential disruption to transport.
“It is vital there are sufficient stockholdings of diesel held on-shore to assure our members that the supply chain can continue to operate,” NRC chief executive Justin Tighe-Umbers says.
“New Zealand is totally reliant on imported diesel and we are vulnerable to any disruption to that supply or issues with product quality upon arrival.
“This vulnerability must be mitigated by ensuring there is sufficient on-shore supply to buffer these potential disruptions.”
Tighe-Umbers says this vulnerability has existed for decades and New Zealand has faced shortages of diesel before Marsden Point was closed with the only difference now being we import refined product.
Adding capacity for on-shore storage will place New Zealand in a far stronger position with refined product being able to be sourced from a variety of sources.
He says the recommendation to increase on-shore capacity to 21 days’ supply should be seen as a minimum requirement, and welcomed the Government’s plan to stockpile another seven days’ supply on top.
He says it may be necessary for the Crown to take a direct role in adding to this capacity as it may be difficult to justify private sector capital investment in infrastructure that supports a sector that is transitioning away from fossil fuels as the fleet decarbonises.
The requirement for additional capacity may not exist long enough to provide a return on capital.
“Relying on fuel in transit as part of our on-shore reserves is problematic. Until it is in on-shore tanks tested for quality it is not guaranteed able to be used,” Tighe-Umbers says.
