Russian oil could still be finding its way to NZ in imported petrol and diesel

Wednesday, 20 April 2022

The task of preventing any Russian crude oil from creeping into the supply chain appears to have been complicated by NZ’s switch to importing pre-refined products.

Z Energy, BP and Mobil have been unable to guarantee petrol and other fuels they currently sell in New Zealand don’t contain any Russian oil, even though they say they are doing what they can to prevent that.

Energy Minister Megan Woods reiterated on Wednesday that New Zealand no longer purchased any oil or oil products from Russia.

The country’s three oil majors have switched to only importing pre-refined fuels following the closure of the Marsden Point oil refinery at the end of March which used to meet most of the country’s fuel needs.

The switch away from importing and refining crude oil appears to have complicated the task of ensuring the supply chain is clean of Russian oil.

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Z spokeswoman Haley Mortimer said it was impossible to rule out Russian crude being included in the world’s current refined-product stock, given that Russia has been the second-largest oil exporter in the world.

Energy Minister Megan Woods says fuel companies are reporting “a phasing out of the very small quantities of Russian crude”.

Crude currently being refined may have been exported prior to the invasion of Ukraine, she said.

Mortimer indicated Z was also to some extent reliant on its suppliers to ensure no other Russian crude crept into the mix.

“As Z is not part of a multinational oil major, we have different options for procuring refined fuels,” she said.

“We have received assurances from our two suppliers, who supply product to Z from multiple regional refineries, that they comply with all existing international sanctions.

“We continue to work on a best-efforts basis with our suppliers to ensure that refined product doesn’t include Russian crude, but this can’t be guaranteed given there is no fool-proof system to trace product flows through the entire supply chain.”

A BP spokesman based in Sydney said the company decided in February that it would no longer enter into any new contracts for Russian oil and gas.

The Ukrainian president has condemned separatists' statements calling for the use of 'chemical forces' against troops defending Mariupol.

“However, BP also purchases fuel from third party refineries to supply customers and depending on the location and configuration of these facilities, they process crude oil from different parts of the world, including Russia,” he said.

“Many markets including those in this region work with ‘co-mingled’ logistics systems to which many parties – BP and others – have access and provide fuel for.”

Given that, the “precise origin of molecules in a particular storage facility, service station or batch of fuel” is often next to untraceable, he said.

“Even in countries which have now implemented a ban on Russian crude oil, it will take some weeks or months for any Russian-origin hydrocarbons currently in the co-mingled systems to leave the system.”

BP was operating in a “highly dynamic situation” with regard to evolving sanctions and international restrictions on business with Russia, the spokesman said.

“We will of course continue to comply with all sanctions and restrictions,” he said.

Mobil New Zealand country manager Andrew McNaught said in a statement that most of the refined fuel it bought came from an ExxonMobil-owned refinery in Singapore and a smaller amount from “third party Asian refineries” which were subject to sanctions.

A spokesman clarified there was “an extremely low possibility” there was any Russian oil in its fuel.

Woods said most pre-refined fuel imported into New Zealand came from refineries in Singapore, South Korea and Japan which she understood had in the past used “very small quantities of Russian crude”.

“As refineries source their crude from a number of different markets, the Government has limited visibility of all the inputs in the finished refined product,” she said.

“However, in the wake of recent events, these refineries are increasingly switching to alternative sources of crude oil,” she said.

“New Zealand fuel chief executives are already reporting to me a phasing out of the very small quantities of Russian crude, saying they are committed to removing Russian crude from New Zealand’s supply chain.”

Western countries have been attempting to block purchases of Russian oil as part of their sanctions efforts following Russian ruler Vladimir Putin's brutal and botched invasion of Ukraine.

But that has led to reports of Russian fuel being offered at substantial discounts to buyers that will still take it.

India and China are among countries that continue to buy oil from Russia, with India reported to have increased its purchases as a result of lower prices.