Government getting advice on proposal to boost Marsden Point storage

Source: Radio New Zealand

The minister responsible for fuel security says he has received proposals from import terminals to open up more diesel capacity, but any recommission of tanks would be a while off.

Associate Energy Minister Shane Jones said almost half of Marsden Point’s available storage was being used, and there had been a proposal to refurbish unused and empty tanks to boost diesel storage.

The tanks had been empty since the closure of the refinery in 2022, with Marsden Point now operating solely as an import and storage terminal for refined oil.

Jones said he had spoken to Rob Buchanan, the chief executive of Channel Infrastructure, which owned and operated Marsden Point.

“He said that there could be two tanks that could be repurposed, and he has sent through a proposal to us. However, because of the degradation since the closure of the refinery, it will take time,” Jones said.

“They have put forward a proposal to work, as I understand, with the Crown, to refurbish some storage tanks. Then the officials are working through, ‘do they think it’s a sensible thing to do and what it’s likely to cost the Crown and Channel if we were to work together?’”

He expected to receive that advice from officials “sooner, rather than later”.

Jones had also spoken to the chief executive of the Port of Taranaki, who had told him there could be up to three days of storage there.

“But two thirds of the potential storage is owned by Methanex, so I’m in no hurry to chase Methanex out of New Zealand,” Jones said, adding Taranaki would also need some new infrastructure.

“I think Marsden Point are confident, if they can get some regulatory relief. Taranaki said they have to build a new bund, because the regulations have changed. So look, I think that if we’re going to do this, we need to strip away the regulations without creating a public nuisance, and also arrive at a point where we can, if not share the costs, work out how soon it can be done.”

Combined, Jones estimated it would add “several days” to diesel storage capacity, with costs going towards the refurbishment and then purchasing the diesel.

Those costs, Jones expected, would be shared between the Crown and Channel.

A spokesperson for Channel Infrastructure said Channel was aware of Jones’ comments, but it did not comment on discussions with any of its customers.

“Channel has identified some very preliminary options for significantly increasing diesel storage capacity at Marsden Point,” the spokesperson said.

The spokesperson said Channel had almost 300 million litres of fuel storage in service at Marsden Point, and an additional 350 million litres of tanks that “could be converted” to provide additional fuel storage if required.

“The government’s Fuel Security Study concluded that the best way to improve New Zealand’s resilience was to increase the in-country storage of fuels that are critical to keeping our economy moving, and Channel stands ready to put all efforts into safely assisting with additional fuel resiliency measures, should we be asked to provide them.”

Fuel importers were required by law to hold 28 days’ worth of petrol, 24 days of jet fuel, and 21 days of diesel.

From 2028, the minimum requirement for diesel would increase to 28 days, if the fuel importer had more than 10 percent of the market share.

In 2024, the government stopped work on procuring 70 million litres of reserve diesel stock, saying it carried significant capital cost and Cabinet would need a robust understanding of options and their impacts before making decisions.

The fuel would have been funded through the Petroleum or Engine Fuels Monitoring Levy.

Instead, the government decided to explore other options to increase the diesel reserves from 21 days to 28 by 2028, and commissioned the Ministry of Business, Innovation, and Employment to study New Zealand’s fuel security requirements.

Under questioning from Labour’s energy spokesperson Megan Woods in the House on Tuesday, Jones said there was “no budget, no proposal that I could credibly take forward to my colleagues” on the reserve diesel stock.

New Zealand First has continued to blame Labour for the closure of the refinery in 2022, and has been attempting to tie the “degradation” of the storage capacity to the closure.

New Zealand First leader Winston Peters went as far as to suggest the refinery was “deliberately shut down, with the government’s connivance”.

In 2021, Labour had the option of providing a loan or subsidy to keep the refinery open, but then-minister Woods said there was not a strong case.

“There does not appear to be a clear case for maintaining refinery operations for fuel resilience reasons, except to address an exceptional ‘no fuel imports’ scenario,” she wrote in a 2021 Cabinet paper.

“This is an unlikely scenario, but not entirely implausible, therefore I believe the option of maintaining refinery capacity warrants an active decision by government.”

In the House, Jones accused Woods of making an “active decision” to close the refinery.

“If you close down 700 million litres of storage, 70 million is a mere drop,” he said.

Labour has repeatedly said the closure was a business decision made by its private owners, not a government decision.

“At most, you’d be talking about five days of unprocessed crude oil, in addition to whatever we have in terms of processed fuel onshore. Five days in the grand scheme of what we’re dealing with at the moment isn’t very much,” said Labour leader Chris Hipkins.

“There are certainly other things the government could have done over the last two years to increase our resilience. Marsden Point would be right at the bottom of that list.”

During Question Time, Peters asked the prime minister if all the “anxiety” around supplementary reserves would be relevant if “they hadn’t shut down Marsden Point?”

“It was a critical piece of national infrastructure and that was a decision of a previous government,” Christopher Luxon responded.

Luxon was then made to withdraw the comment, after Hipkins raised a point of order to argue the previous government had made no such decision.

On Tuesday, Woods told RNZ she was supportive of proposals for more storage space.

“Absolutely, and I would hope the government’s looking at that right now,” she said.

But she accused the government of being “short sighted” for scrapping the 70 million litre strategic reserve plans, which were to be a “worst case scenario” to ensure critical services like fire engines, ambulances, and food distribution could keep running.

That would have been in place this year, Woods said, whereas the government’s increased requirement for 28 days of diesel holdings would not come into place until 2028.

“One of the reasons the government scrapped that strategic reserve and got rid of the request for proposals that was out there, they said it was cost. It’s several million dollars to build that facility, in terms of being able to hold it, but there was up to $100 million of built-up levy sitting in the Petrol Levy fund, essentially that had built up over Covid that we were proposing to use for that,” she said.

“Instead, the government has gone for an option where the fuel companies themselves will hold this additional diesel, which will cost motorists more for diesel at the pump, and it will be two years’ delay.”

ACT leader David Seymour has previously disagreed with Jones on the economics of keeping the Marsden Point refinery open.

But he saw the merits on using more of its storage capacity.

“The reality is it would probably be a levy on the fuels themselves. But if that was to be proposed, I think we would look at it very carefully on the costs and benefits. I think the world just changed, and we can see that having some more independence is probably not a bad bit of room to have.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand