No estimate yet for cost of diesel crisis

By Phil Boeyen, ShareChat Business News Editor

Tuesday 29th May 2001

It could be some time before the cost of New Zealand Refining's (NZSE: NZR) current diesel crisis can be worked out.

The company says although it has notified its insurers, technical and legal advisers, it is unable to yet estimate the financial impact of the problem.

"It will be some time before the situation is resolved in terms of liability, insurance cover etc," the company says in a statement.

NZR says it began hearing complaints about its winter grade diesel last Wednesday and had confirmed by Friday that the fuel could cause filtering problems.

The fault is thought to lie with an additive, which is actually supposed to improve the flow of diesel in cold weather.

Although the refinery, which is majority owned by the big four oil companies in New Zealand, began making new diesel on Friday the company says the logistics of getting new product into the supply chain is extremely complex.

"It is made more difficult by having high fuel stocks in certain locations meaning there are no tanks immediately available for new product and also the need to continue the supply other petroleum products to terminals around the country."

The refinery has also been testing the possibility of re-processing the affected fuel stocks and it says initial results for re-processing are promising.

"It is likely that some product will be returned to Marsden Point for re-processing. We have not discussed the volume of product involved as the amount of affected fuel reduces as we speak and depending on the final solution may or may not be relevant."

The four oil companies have today set up a free-phone help line to provide information and manage the process for reimbursing costs of replacing diesel fuel filters.

Stocks of new diesel are already being distributed in the North Island and were due to land in the South Island early Tuesday.

NZR says the first priority for these stocks will be commercial marine users with the aim of having all marines fuelling stations replenished by Friday.

"The oil companies are in consultation with the fishing industry over how to replenish their vessels quickly and safely," says NZR general manager Alan Davie.

The company has meantime advised land-based diesel users to keep using the current diesel stocks, as long as they get fuel filters replaced at the first signs of clogging.

"Engine damage is very unlikely, but it is important to seek advice as soon as symptoms develop," says Mr Davey.

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