Oil Security Review 2012
In 2011 and 2012, the Ministry of Business, Innovation and Employment (MBIE) commissioned three studies into New Zealand’s oil security. The studies assessed two types of oil supply disruptions:
- Domestic supply disruptions: disruptions to domestic supply chain infrastructure that result in supply shortfalls and fuel distribution problems.
- International supply disruptions: disruptions arising outside of New Zealand that result in a spike in the global oil price resulting in damage to New Zealand’s economy.
On 30 October 2012 MBIE released a discussion paper for public consultation on a range of proposals to improve oil security in New Zealand. These proposals were developed based on the finding of the reports, and from discussions with stakeholders.
Submissions closed on Tuesday 27 November 2012.
- Discussion Paper [2.1 MB PDF]
- Three reports
MBIE received a number of formal submissions in response to the discussion paper. You can see those submissions here.
Cabinet decisions on oil security proposals
Domestic oil security
The proposals to improve New Zealand’s domestic oil security focussed on minimising the economic cost of supply shortfalls from domestic infrastructure disruptions. The review found that:
- the fuel supply network in New Zealand is already reasonably robust
- the oil supply industry is adept at responding to most supply disruptions
- government already has processes in place to manage severe disruption events
- significant capital expenditure by government in the oil supply network is not required.
The review found that there are a number of non-regulatory measures that would improve domestic oil security. Following public consultation, Cabinet has agreed to the following measures. MBIE will be working with other government departments, the oil industry, and consumer groups, to progress these measures.
|Measure||Issue it addresses|
Under the existing High Productivity Motor Vehicle permit regime, define routes that may be suitable for fuel trucks exceeding normally-permitted mass limits to operate on in an oil supply emergency.
Allowing trucks to operate at a higher weight (within their existing technical capacity) could help to make up fuel trucking capacity shortfalls during a fuel supply disruption.
Develop an oil contingency handbook to outline responsibilities and procedures to be followed in the event of an oil supply disruption.
Greater clarity around the procedures to be followed and the responsibilities of different parties could expedite industry’s and government’s response to a disruption.
Perform further technical analysis of a proposal to undertake pre-emptive planning work for an emergency Refinery-to-Auckland Pipeline (RAP) and Wiri-to-Airport Pipeline (WAP) bypass.
A connection between the RAP and WAP, bypassing the Wiri terminal, could provide an alternative supply of jet fuel to Auckland Airport in the event of a Wiri outage.
Establish a working group comprising relevant departments and industry participants to share information on oil security issues and assist in developing measures to improve oil security.
Since market conditions can change rapidly, oil security requires constant monitoring and discussion.
Review the information government currently collects on fuel stocks and storage capacity. Assess whether it is fit-for-purpose and identify what information should be collected and, potentially, published.
There is a lack of public information on the level of fuel stocks and storage capacity. Better information could improve transparency and assist in planning.
Promote awareness by service stations of the benefits of back-up electricity generating capacity.
Back-up electricity generating capacity at retail service stations would help avoid local oil supply disruption in the event of widespread and on-going power outages.
Develop a better understanding of existing hazard prevention and response procedures in the downstream oil sector.
Deficiencies in downstream oil sector assets’ hazard prevention and response measures, should they exist, present a risk to oil security, persons at or in the vicinity of the facility, and the environment.
International oil security
As a member of the International Energy Agency (IEA), New Zealand has a treaty obligation to contribute to global oil security by holding 90 days of net imports of oil stock. The cost of meeting New Zealand’s treaty obligation is expected to rise from around $5.2 million in 2013/14 to around $10.6 million in 2016/17, due to a forecast upturn in New Zealand’s net imports.
Following public consultation, Cabinet has agreed to a “user-pays” proposal to fund the IEA obligation by increasing the Petroleum or Engine Fuel Monitoring Levy. The increase is necessary to meet our international obligations, but is minimal. Assuming that regulations are in place by July 2014, the levy will increase by approximately 0.204 cents per litre (8.2 cents for a 40 litre tank). The precise increase will depend on any variations from cost forecasts and the exact timing of the passage of legislation.
- Read the cabinet paper for these decisions [1.1 MB PDF]
- Read the Regulatory Impact Statement for these decisions [1.1 MB PDF]