Fuel firms told to invest at Auckland airport by June or Government should step in

Monday, 16 September 2019

Energy minister Judith Collins updates the press on progress fixing the ruptured pipeline that transports jet fuel from Marsden Point in Northland to the airport in Auckland (first published in 2017).

Fuel supplies to Auckland Airport are not sufficiently secure and investment in extra infrastructure is needed 'without delay', a Government inquiry into the 2017 Auckland fuel crisis has concluded.

The fuel crisis began when the 170 kilometre pipeline linking Refining NZ's Marsden Point oil refinery to customers in Auckland suddenly ruptured, sparking a two-week crisis that saw more than 100 flights cancelled at Auckland airport.

The inquiry report published on Tuesday said a digger operated by a 'contractor' suspected of damaging the fuel pipeline in 2014, setting in motion its later failure, was owned by Auckland company Oravida Kauri, which was renamed Kauri Ruakaka the following year.

Fuel companies should be given until June to progress new investment that would make Auckland Airport more resilient, or the Government should step in, an inquiry says.

David Wong-Tung, the husband of then energy minister Judith Collins, was a director of Kauri Ruakaka until 2017, but is no longer on its board.

* Emergency shutdown and pump failures preceded pipeline rupture

* Refining NZ defends not re-testing Auckland fuel pipeline**

Former Engineering NZ president Elena Trout who headed the inquiry, said it understood the contractor sold swamp kauri to Oravida when he found them and was not charged by Oravida for the digger.

An inquiry says the vulnerability of Auckland Airport to fuel outages is increasing as the demand for flights grows.

But he was a 'totally independent contractor' and as far as the inquiry team was aware, he did not have a relationship with the company, she said.

While much of the political interest in the inquiry is expected to be on that irony, the report strongly criticises fuel companies BP, Mobil and Z Energy.

'In our view, the fuel companies have failed to make timely investments to achieve and maintain the level of resilience in the supply chain that we regard as appropriate,' the inquiry said.

Its report said it was essential that the Government and industry work together to ensure Auckland could cope better in the event of a future crisis.

It makes 21 recommendations, including that the fuel companies build sufficient jet fuel storage at Auckland Airport for it to operate for 10 days at 80 per cent capacity, and ensure they can deliver 10 per cent more fuel to the airport each day than it needs during periods of peak demand.

The fuel companies should provide progress updates to the airport, the airlines, and the Government.

If they were not able to make 'the necessary progress' by June 30, the Government should take steps to intervene, using new statutory powers, it said.

BP New Zealand managing director Debi Boffa said BP remained committed to playing its part in meeting future needs and had 'committed funds to be invested' in additional storage at the Wiri Oil terminal near the airport.

Refining NZ has been cleared of blame for the Auckland fuel crisis by a government inquiry despite its 'emergency shutdown' earlier on the day of the outage.

The inquiry said that if there had to be a rupture of the pipeline, it was 'lucky' it failed when it did.

A government inquiry into the 2017 Auckland fuel pipeline leak says the big oil companies must act urgently to ensure the city can never again be cut off.

'The rupture occurred outside peak air travel times and at a time when the jet fuel tanks at the Auckland end of the pipeline were near capacity, which meant the airport had available close to the maximum amount of jet fuel possible to be used while the pipeline was repaired.'

The consequences could have been 'far worse than they were' and risks had since increased, it said.

'There is limited storage near the airport to provide cover for an outage and the number of days of cover that storage provides is decreasing as the daily demand for jet fuel grows. This means our vulnerability is increasing.

'In its current state, parts of the supply chain will not be able to meet basic demand in a few years' time, let alone recover from, or provide resilience during, an outage of any significant size.'

Refining NZ increased the operating pressure of the fuel pipeline a month before it ruptured and the inquiry said that 'may have accelerated the failure of the damaged section of pipe', but it said the company operated the pipeline in keeping with its legal requirements and 'standard industry practice'.

The fuel pipeline failure resulted in the leak of about 70,000 litres of jet fuel.

'In short, the [pipeline] had been operated properly. It ruptured because it had been hit by a digger operated by a contractor looking for swamp kauri in August 2014.'

Although Refining NZ has accepted an internal inspection of the pipeline prior to the August 2017 pressure increase might have alerted Refining NZ to the damage, 'there was no reason for Refining NZ to carry out an additional inspection of the pipeline given the information it had on its condition,' the inquiry said.

Months after the pipeline leak, it emerged that a maintenance worker had accidentally triggered a fire alarm at a pumping station part-way along the 170 kilometre pipeline about two hours before the pipeline ruptured, resulting in an emergency shutdown.

A report by engineers WorleyParsons that was provided to Northland Regional Council and subsequently released to Stuff under the Official Information Act stated that two of the three pumps on the pipeline failed to restart when the refinery began pumping fuel back through the pipeline about 20 minutes later, resulting in a pressure increase to nearer the pipeline's maximum-allowed level.

Despite that, the 178-page report from government inquiry did not make any reference to the pump failures or the pressure spike on the day of the rupture that was referred to by WorleyParsons.

Trout said it was advised that 'pressure was not directly related to the cause of the failure'.