Government confirms it’s partnering with Z Energy on emergency diesel reserve
Tuesday, 28 April 2026
The Government has signed a letter of intent to secure an additional 90 million litres of diesel from Z Energy, Prime Minister Christopher Luxon has announced.
The deal, previewed by The Post earlier today, will see Z bring the additional fuel to New Zealand in late June or early July, to create what will in effect be an emergency diesel reserve underwritten and controlled by the Government.
Finance Minister Nicola Willis told reporters at the post-Cabinet press conference on Tuesday afternoon that the Government was preparing for the possibility of fuel supplies being disrupted by prolonged conflict and the deal with Z beefed up the buffer that already existed.
Current rules separately require the country’s five bulk fuel importers, including Z, to separately hold 28 days’ worth of petrol and 24 days of jet fuel in the country or on ships in its Exclusive Economic Zone, but only 21 days of diesel.
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Under the terms of the new proposed deal, Z Energy will “procure, own and manage” the additional diesel, which would be equivalent to about nine days’ national demand for the fuel, Willis said.
“This is something that they are already experts at, and not something the Government is an expert at.”
But the Government would control the release of the fuel to the market and the timing of that release, should it be necessary, Willis said.
“I want to be clear, this additional fuel will not count against Z Energy's existing minimum stock holding obligations during the terms of the agreement.”
Z had been selected to partner with the Government on the emergency diesel reserve after “a contestable procurement process in which a number of bidders put forward proposals”, she said.
Willis would not to say how much money Z was expected to earn as profit from the arrangement, describing that as “commercially sensitive”.
“What I can assure you is we have sought to limit the exposure to the taxpayer. It's been a tough negotiation. Our negotiators are looking at the whites of the eyes of Z Energy and we have driven a hard bargain, as you’d expect us to do.
“I note that the Australians also haven't shared the commercially sensitive details of their arrangements,” she added.
The Government is understood to have decided to partner with an existing importer to create the fuel reserve in part because it will need to regularly turn over the diesel to avoid it deteriorating in storage, and then top the tanks back up again.
Earlier this month, the Government agreed to pay Channel Infrastructure — which formerly operated the now-defunct Marsden Point oil refinery — $21.6 million to lease refurbished tanks to hold the diesel reserve.
Critical services such as lifeline utilities and food distribution account for between 10% and 20% of diesel use, according to a report released by the Government earlier this year.
About 80% of diesel use is for trucks, utilities and vans, and 7% for buses and trains, according to the National Fuel Plan published in 2024.
Prior to the conflict in Iran, the Government had been in the process of raising the minimum holding requirement for diesel to 28 days, but that change would not kick in until 2028.
A spokesperson for Z Energy said it was pleased to have progressed “in principle terms” with the Government on the agreement, which it said would help support New Zealand’s fuel supply resilience.
“Z will work with Government towards this fuel being available for supply, including into the areas where it is most needed, in support of the national interest,” he said.