The Marsden Point refinery jetty from Reotahi. Photo / John Stone
The Marsden Point refinery jetty from Reotahi. Photo / John Stone
COMMENT by Gavin Evans
Transparency and disclosure are central tenets of investment markets and good decision-making relies on good information.
So it was disheartening to hear executives from Air New Zealand, Auckland International Airport, BP, Refining NZ and Z Energy talking in circles earlier this month on the investment neededto keep up with projected fuel demand at Auckland airport – this country's main link to the rest of the world.
Many of the issues came down to a lack of information or structured processes for sharing and then acting on it. Ironically, hardly any media were present for the three days of public hearings.
There is no crisis, but timely action is needed, the inquiry into the 2017 Auckland fuel disruption heard.
Z Energy and BP are willing to invest; Mobil less so. The partners also differ on the best upgrade options beyond adding storage at the Wiri fuel terminal.
The airlines say they are prepared to pay for secure fuel supplies but need confidence the investment plans are reasonable and affordable.
The airport says it has sought information on utilisation of the existing assets and the joint venture's investment plans for their systems, with no result. Executives weren't able to explain why the airport had sent conflicting signals on when the existing jet fuel hydrant system would be relocated.
For the record, the airport says the current hydrant lease is a "hard constraint" in its development plans and remains in place until 2035. The airport's 30-year "vision" had indicated the facility could be scrapped by 2030 to make way for an expanded domestic jet terminal – not an encouragement for further investment.
Fuel security for Auckland – particularly growing jet fuel demand - has been a live issue since at least 2012.
And the fuels sector, councils and government could have used the past six years to learn from the successful evolution of arrangements in the power sector in recent decades – and the still-evolving arrangements in the gas sector.
The fuel industry is different in important ways. But much of the change in power and gas has been achieved through information provision.
National grid operator Transpower signals its views on upcoming regional investment needs years in advance in formal planning documents, as do local lines companies in their asset management plans.
Generators, major users and distributors publish daily planned plant and line outages; Meridian Energy publishes estimated snowpack; Contact Energy publishes its gas draw from Ahuroa. Transpower publishes a six-month outlook of potential generation "tight spots" and daily risk curves show the country's hydro storage relative to expected demand and the 10 per cent risk of shortage that triggers a national conservation campaign.
None of these processes were automatic when competitive generation started 23 years ago. Some started as good engineering practice and loose industry "understandings" and have been codified over time. Participants have either volunteered more information on things like contract prices, fuel supplies and outages, or been quietly pressured to do so. When that hasn't worked, regulators have stepped in.
Refining New Zealand pipeline repairs at Ruakaka last September. Photo / Michael Cunningham.
The same is happening in the gas sector, although information on field shutdowns remains a live issue.
Rules for how participants will respond in a pipeline emergency, and who will get gas and who won't, were extensively revamped after the five-day Maui pipeline shutdown in 2011.
Lessons learned included the need for: an independent agent to call and manage a critical event; regular industry-wide exercises to test systems; and ongoing visibility of the changing fuel needs of essential services – such as hospitals and rest homes – and of their key suppliers, such as caterers and laundries.
A new gas transmission code is also close after three years' work.
The fuel inquiry report – due in August - will deliver important lessons from the September 2017 shutdown of the fuel pipeline from Marsden Point.
The response appears to have been good, but so it should have been - a just-updated petroleum security assessment by consultants Hale & Twomey provided a virtual blue print for action.
But there are questions.
Why were jet fuel stockpiles low in Christchurch – the country's back-up international air link – when the sector knew Auckland's supplies were already constrained by tank maintenance at Wiri and the airport?
And did it really make sense to prepare the navy's tanker – HMNZS Endeavour – to transport fuel from Marsden Point and then have one of the joint-venture fuel companies decline to use it due to it being only single-hulled?
Joint venture asset ownership has saved consumers a fortune by avoiding duplicated fuel infrastructure around the country. But they offer little transparency for users or regulators and aren't always speedy.
The challenge for the inquiry, if it chooses to, will be to chart a course to drive their evolution.
As inquiry chair Elena Trout noted, as decision-making structures they can be "particularly problematic" for those outside the joint ventures.
