Investment in extra 'fuel security' at Auckland Airport may be delayed
Tuesday, 5 May 2020
Investment plans worth tens of millions of dollars to increase fuel security at Auckland Airport may be delayed because of the coronavirus pandemic and the collapse of air travel.
Z Energy is reviewing plans it made in the wake of the Auckland fuel pipeline outage to build up fuel storage facilities at the airport.
It is understood Z and other fuel companies believed an investment of tens of millions would be needed to implement the recommendations of the Government inquiry into the 2017 Auckland fuel pipeline outage.
The inquiry recommended in September that fuel firms should build sufficient jet fuel storage at the airport for it to operate for 10 days at 80 per cent capacity.
It also wanted fuel companies to ensure they could deliver 10 per cent more fuel to the airport each day than it needed during periods of peak demand.
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The inquiry team recommended that if fuel companies didn't firm up their plans by the end of June, the Government should step in.
But Z spokeswoman Victoria Crockford said Z was reviewing its commitments to invest in additional fuel storage and infrastructure at the airport 'in the short term'.
'Covid-19 has severely impacted existing jet demand, which is currently down by 90 per cent, as well as forward projections,' she said.
Crockford said that after the 'global financial crisis' it took New Zealand until 2015 for jet fuel demand to bounce back to its 2008 level.
'We remain committed to scoping a medium to long-term investment,' she said.
'This is currently under discussion with our joint venture partners and other stakeholders.'
Energy Minister Megan Woods appeared to indicate she was relaxed about some delay.
Woods said she had asked fuel companies and Auckland Airport to report to her every three months with updates on how they were responding to the inquiry's recommendations.
But fuel resilience at the airport was 'the least of the problems currently facing airlines', she said.
'I acknowledge that some investment plans may currently be under review in light of the very significant impact Covid-19 is having on the aviation sector and the fuel sector.'
Jet fuel is currently pumped to the airport and petrol pumped to Auckland from Refining NZ's refinery at Marsden Point.
But Refining NZ — which employs 412 employees and 251 contractors across its operations — is currently reviewing the future of its refinery because of a steep drop-off in its profit margins.
One of the options under consideration appears to be for Refining NZ to close its refinery at Marsden Point and instead switch to importing fuel that has already been refined.
Refining NZ spokesman Greg McNeill could not comment on whether the review might also have implications for the use of its fuel pipeline or the recommendations of the pipeline inquiry.
'The purpose of the strategic review is to be the most competitive refining and distribution business we can be, and to operate a sustainable business over the long term.
'That means that all of the review options presented to shareholders are on the table including continuing to run the refinery, but we won’t know until later in the review process which option, or combination of options, will be preferred,' he said.
The continued operation of the pipeline 'and the potential to manage other assets in the national fuels supply chain' were 'part of the review and something will be working through with our customers', he said.