The Government is preparing for the worst and is ready to access 40 days’ worth of emergency fuel stocks held in the United Kingdom, the USA and Japan.
New Zealand has contracts to secure the fuel under an International Energy Agency agreement.
The contingency plans are a backstop if the fuel companies are unable to deliver on their forecasts of what fuel they can supply.
Associate Energy Minister Shane Jones confirmed on Friday that New Zealand was looking to access the reserves.
“We have 40 days’ worth,” he said.
“The Minister of Finance and I are taking advice from the officials as to the most efficient and effective way to use those options to bolster a buffer for New Zealand.
“We will take that advice after no doubt the officials have consulted the existing import companies, and if another strategy is needed, that matter would need to be discussed by the cabinet.”
There are questions about where the fuel could be stored once it has been procured.
Marsden Point has sufficient storage for only a week’s use.
One idea being floated in Wellington is for the Government to charter a tanker and tie it up at Marsden Point for additional storage.
The fact that accessing the reserves is now being discussed is a clear indication that the Government believes the fuel crisis will take some months to resolve.
There are two guiding documents behind the Government’s approach: the 2024 Fuel Security Plan and the 2024 National Fuel Plan.
Both are the Ministerial responsibility of Shane Jones, the Associate Minister of Energy.
In a little-noticed move when the new Cabinet was formed in 2023, Jones was assigned specific responsibility for “all matters relating to engine fuel security, specifications, and infrastructure.”
“This includes leadership on policy, legislation, regulations and rules governing the import, refining, storage and distribution of engine fuels,” his schedule of responsibilities says.
It is why he, rather than Energy Minister Simon Watts, joins Finance Minister Nicola Willis at all the briefings on the crisis.
At these briefings, Jones has been very careful to say that estimates of future supplies have been produced by the fuel importers, not the Government.
“The fuel companies have not once confirmed with us that they believe that they’re going to suffer any supply problems,” Jones said at Friday’s briefing.
Jones said that 38 per cent of New Zealand’s fuel comes from South Korean refineries, most of the rest from Singapore.
“We have never had one single report in the discussions that various ministers have had with the leaders of those countries, that we are going to be either caught short and we are depending on, and we are trusting what the fuel companies say.”
But the planning to access the IEA fuel reserves indicates that trust in the companies goes only so far and that if the companies fall short, then the IEA reserves would need to cut in.
But for the meantime the Ministers are relying on the companies.
“Yesterday we spoke with one of the CEOs, and we left that meeting very, very confident,” Jones said.
“We have a just-in-time model in New Zealand.
“We have been assured; we have seen evidence of four to six weeks of secure supply.
“That is how the system works in New Zealand. We are conscious that the refineries are having to manage feedstock problems. Still, no Kiwi should doubt either what we’re saying or the quality of information that we’re receiving from the fuel companies. If that information needs to be ramped up, we’ll find a regulatory way of improving the flow of the information in the event we need it.”
Willis gave a clue as to how that might work.
“We have in law in New Zealand, Minimum Stockholding Obligations for Fuel Companies,” she said.
“These require them to hold minimum stocks of fuel either in New Zealand or in our sovereign waters.
“That is one of the reasons why we track fuel in country and in our sovereign waters because it’s a legal requirement that that buffer, that safety reserve, is maintained by the fuel companies; they face severe penalties if they don’t meet that.
“It’s in their interests to inform us well in advance if they think there’s any risk to those buffer opportunities.”
Willis has already had to step in to resolve information issues with her own advisors at the Ministry of Business, Innovation and Employment.
The Government has been clearly embarrassed by some of the fuel estimates running on private websites like NZOilWatch and the Taxpayers’ Union Fuel Clock.
Both sites have shown substantially lower fuel reserves than MBIE claimed on its site.
On Friday, the Taxpayers’ Union said MBIE should front up and explain “the extraordinary events of the last 24 hours, which saw Wednesday’s fuel supply update (accurate as of last Sunday) changed three times over the course of the day.”
Willis said she had called MBIE in to discuss the discrepancies.
It seems some of those arose because MBIE has access to confidential shipping information, which the fuel estimates do not.
Nevertheless, it was clear the Minister was not happy.
“I think that the communication yesterday (Thursday) from MBIE was confusing,” she said.
“I met with their data team for an hour last night, and we’ve agreed on two things going forward.
“One, that we are going to provide that data to you, clearly splitting out which ships are in our sovereign waters and which ships are further afield, because we recognise that knowing a ship is actually discharging at port or only a day away gives much more confidence than thinking it’s two or three weeks away.
“And the second thing is that we’ve now agreed that they will share any intended communications with Minister Jones and me before publishing those to their website.”
The management of this whole crisis is almost entirely dependent on forecast data.
That puts pressure on the fuel companies and MBIE, but it is clear the Government is preparing contingency plans should their estimates and forecasts prove wrong.
