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Government prioritises fuel resilience

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Staff Reporter

08 June 2024, 8:24 PM

Government prioritises fuel resilienceFocus on strengthening diesel reserves and regulations. Photo by Engin Akyurt

The Ministry of Business, Innovation and Employment (MBIE) is halting work on procuring reserve diesel stock to explore more effective methods to enhance New Zealand's diesel resilience, Associate Energy Minister Shane Jones announced.

"Ensuring New Zealand holds enough reserve stocks to ride out disruptions is a key pillar of fuel security," Jones said.

"While the risks of supply disruptions are low, the consequences of a severe and sustained disruption would be significant."

Legislation introduced in 2023 mandates that fuel importers must hold 28 days’ worth of petrol, 24 days of jet fuel, and 21 days of diesel by January 1, 2025.

However, the proposal to fund 70 million litres of reserve diesel was deemed too costly.

Instead, MBIE will seek public input on the appropriate level of diesel reserves and potential strategies through a discussion paper to be released later this year.

"A proposal for the government to investigate funding 70 million litres in reserve diesel stock and its storage was also committed to at the time," Jones explained. "Procuring additional reserve diesel carries significant capital cost. Cabinet will need a robust understanding of options and their impacts before making decisions."

The initiative to bolster fuel resilience includes changes to the minimum fuel stockholding obligation (MSO) regime.

These changes aim to minimise compliance costs for fuel importers.

Under new regulations, stock in the Marsden Point to Auckland pipeline and jet fuel refuelling facilities with over 1 million litres can be counted towards the minimum stockholding requirements.

Furthermore, an internal assurance statement from a company's board will be accepted instead of an annual independent audit, further reducing verification costs.

Jones highlighted the importance of these measures in ensuring New Zealand's fuel security, given the country's reliance on imported fuels.

"A secure and resilient supply of engine fuels is critical to the economy, and as nearly all engine fuels are imported, New Zealand is particularly vulnerable to international and domestic supply disruptions," he said.

In addition to the MSO changes, MBIE will continue its comprehensive work program to enhance fuel security.

This includes commissioning a study into New Zealand's fuel security requirements and collaborating with industry partners to increase jet fuel resilience at Auckland Airport.

"Today's announcement adds to the comprehensive work programme already underway to bolster New Zealand's fuel security," Jones noted.

"We are working closely with industry on their plans to increase jet fuel resilience at Auckland Airport."

Cabinet has agreed to several measures to support the improvement of New Zealand's fuel security.

These include finalising information disclosure regulations to support the minimum fuel stockholding obligation and stopping work on government procurement of 70 million litres of reserve diesel stock.

The government will investigate other options to increase New Zealand's diesel reserves from 21 to 28 days of cover.

"MBIE will seek the public’s views on what the level of cover should be for New Zealand’s diesel stock and options for achieving that through a discussion paper later this year," Jones said. "This process will help ensure that we make informed decisions that enhance the resilience of our fuel supply."

The government's efforts reflect a proactive approach to securing New Zealand's fuel supply chain, ensuring that the country is better prepared to handle potential disruptions in the future.