Wiri terminal alternative wouldn't have avoided pipeline woes: MBIE

Tuesday 19th September 2017

The Ministry of Business, Innovation and Employment says an alternative to the Wiri oil terminal was too expensive and wouldn't have avoided the recent pipeline leak disrupting air services in Auckland because the leak was too close to the refinery.

The pipeline between the Marsden Point refinery and petrol company-owned Wiri storage depot failed last Thursday, disrupting fuel supply to the country's biggest city and forcing airlines to ration flights in an effort to conserve fuel. Refining NZ expects to resume service to Wiri between Sept. 24 and Sept. 26, after which it will take another 30 hours before fuel can be transported to the airport. The company anticipates missing out on between $10 million and $15 million of pipeline and refining income as a result.

Opposition parties have latched onto the outage, which comes a week before the general election. They say the government's infrastructure planning didn't adequately address security of supply. Prime Minister Bill English has said reports examining establishment of a second depot in Auckland found the investment was too expensive, but that the original advice would be revisited.

In response to the domestic oil security review in 2012, Cabinet sought more technical analysis on whether early plans were needed to set up an emergency connection bypassing Wiri to provide an alternative supply of jet fuel to Auckland International Airport from the Marsden Point refinery if the South Auckland terminal suffered an outage.

"The further exploration into pre-emptive planning largely involved a feasibility study by Wiri Oil Services Ltd (WOSL), which indicated that costs were significant," an MBIE spokesman said in an emailed statement. "Intelligence at the time suggested that a by-pass arrangement could be considered if and when additional tankage at WOSL was planned in the future (expected due to growth in jet and diesel fuel usage). On that basis, no further exploration was undertaken into that option."

The study considered planning for a problem at the Wiri terminal and the MBIE spokesman said the by-pass pipeline "would not help in the current situation, where the leak occurred so close to the refinery."

A report prepared for the Ministry of Economic Development, which was subsumed into MBIE, found New Zealand’s national fuel supply network was reasonably robust and adept at responding to most disruptions. However, there was a risk to Auckland supply because the Marsden Point refinery supplies almost all of the city’s fuel through the refinery-to-Auckland pipeline.

The report considered the best contingencies to re-establish supply in a long-term disruption if there was an issue at Wiri, and problems with the pipeline were seen as lower risk than the terminal itself.

The Cabinet paper noted stakeholders' views on building a new fuel terminal in West Auckland varied, with end-users more in favour than fuel suppliers. The upfront cost was estimated at about $57 million, and while it would improve the resilience of supply it wasn't clear the "substantial capital investment" was justified given fuel could be trucked in from neighbouring terminals.

At the time of the review, WOSL said significant capital spending from the government wasn't wanted or needed and that streamlining resource management processes would be more effective to let it expand tankage and improve resilience. That view was supported by Refining NZ, the Marsden Point refinery operator.

Air New Zealand was of the view that problems with the pipeline could be "reasonably managed", but was more concerned about a fire at Wiri destroying the terminal and that building a West Auckland terminal would provide enough security, delaying the need for a second pipeline for "decades".

Refining NZ put a $222 million cost of the refinery to Auckland pipeline in its 2016 annual report, and after accumulated depreciation, the net value was $112.7million at Dec. 31.

Energy Minister Judith Collins yesterday called in the Defence Force, with the HMNZS Endeavour naval tanker charged with helping shift diesel from the refinery to other parts of the country and providing up to 20 tanker drivers to manage the increased workload of taking fuel by road to Auckland. She also said the government is looking at providing greater regulatory flexibility around working hours and weight loads for the tankers.

Today, she told Radio New Zealand's Morning Report that the industry is investigating whether it can configure storage at Auckland's Wynyard Quarter to store jet fuel, which could then receive shipments and truck it to the airport.

Mobil Oil New Zealand manager Andrew McNaught, who is representing the transport fuels companies, said the industry is bolstering trucking resources to deliver petrol and diesel into Auckland from other locations, such as Mount Maunganui and Whangarei, and that two dedicated shipping vessels have full delivery programmes.

The fuel companies continue to work together to try to find industry solutions to the pipeline outage for our customers," McNaught said. "We continue to liaise constructively with government, including around some road transport solutions that might further make supply of fuel into Auckland more efficient."

New Zealand First leader Winston Peters used the crisis to bolster his view about the value of a rail link between the refinery and Auckland.

(BusinessDesk)

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