Marsden Point oil refinery closure: What it means for NZ fuel security now

As conflict in the Middle East raises concerns about oil supply disruption, the focus on New Zealand’s fuel stocks is rising as quickly as prices at the pump. NZ First MP Shane Jones continues to criticise the Labour Government for allowing the Marsden Pt refinery to close. But just what is the truth about the refinery closure and the impact on fuel security? Journalist Denise Piper lays out the answers.

Why did the Marsden Pt oil refinery close?

In 2021, Refining NZ decided to convert New Zealand’s only oil refinery, at Marsden Pt, to an import-only terminal due to challenging global refining conditions, exacerbated by Covid-19 lockdowns and border closures.

New large-scale export refineries in Asia were found to be more efficient.

Just 2% of the refinery’s crude oil came from New Zealand, with 98% imported, mostly from the Middle East.

In 2022, the company changed its name to Channel Infrastructure and accepted its last crude oil shipment, with decommissioning complete by mid-2023.

But wasn’t the refinery owned by taxpayers?

No, Refining NZ was an NZX-listed company.

The decision to close the refinery was driven by shareholders, along with its three major customers – BP, ExxonMobil and Z Energy – who were paying a subsidy to keep the refinery afloat at the time.

When it opened in 1964, the refinery was 69% owned by Shell, BP, Caltex, Europa and Mobil.

Channel Infrastructure has about 300 million litres of fuel storage in use at Marsden Pt and 350 million litres of further fuel storage capacity. Photo / Dean Purcell

The Government heavily controlled the industry initially, but reforms in the 1980s resulted in deregulation and the Government relinquishing its shareholding.

What could the Labour Government have done at the time?

While the decision to close the refinery was a commercial company decision, then-Energy and Resources Minister Megan Woods investigated the closure’s impact on New Zealand’s fuel security.

Expert advice found that importing fuel from multiple different refineries was more resilient to most fuel disruption scenarios than having one domestic refinery, which could be disrupted by the likes of power cuts or natural disasters.

The Government considered subsidising the refinery to keep it running for a further five to 10 years, but Woods decided there were no clear fuel security concerns to justify the cost.

Energy Minister Shane Jones speaks from the inside of a Marsden Pt tank that Z Energy is spending $30 million to convert to jet fuel storage. Photo / Denise Piper

A report commissioned by NZ First in 2024 estimated it would cost up to $7.3 billion to reopen the refinery.

Does the closure make us more vulnerable to fuel shocks such as the current crisis?

Rob Buchanan, the chief executive of Channel Infrastructure, said the current fuel issues were not due to a shortage of refining capacity but a shortage in the crude oil market from the Middle East.

As the refinery imported nearly all of its crude, the same shortages would still apply, he said.

“The Government looked at this back in 2024 with a fuel security study, and the refinery was actually considered to be one of the least efficient methods of providing fuel security,” he said.

Channel Infrastructure CEO Rob Buchanan says that because the refinery relied on imported crude, supply concerns would remain if it were still operating. Photo / NZME

But Jones was unequivocal that the refinery closure led to fuel shortage concerns, in part because there was a loss in the amount of stored fuel.

The Labour Government could have insisted oil companies and the refining company store more fuel, which might have made the refinery more viable to keep open, he said.

What fuel storage does New Zealand have?

Channel Infrastructure had 350 million litres of tank capacity that could be converted from crude oil storage to provide additional fuel storage, Buchanan said.

When the refinery closed, the Labour Government introduced legislation requiring fuel companies to hold a minimum of 28 days’ use of petrol, 24 days of jet fuel and 21 days of diesel in the country, to provide fuel security.

Refining NZ changed to Channel Infrastructure in 2022. Photo / Denise Piper

It also planned to buy and hold 70 million litres of diesel stocks – about seven days’ worth – recognising the importance of diesel for running emergency services and transporting food.

Jones changed this in 2025, requiring the private companies to bear the costs of the extra diesel storage, rather than the Government, pushing the date out to July 2028.

On Thursday, Jones confirmed the Government would pay $21.6 million from the Regional Infrastructure Fund to convert crude tanks to take 90 million litres of diesel.

The tanks would hold about eight days’ supply of diesel when complete, with refurbishment expected to take two months, he said.

it was unclear how the tanks would be filled in the current fuel crisis but Jones said if opportunities arose for New Zealand to secure diesel supplies over and above what was expected, storage would be needed.

What else can be done to improve our fuel resilience?

The fuel security study commissioned in 2024 found the most efficient long-term way of increasing New Zealand’s fuel security was accelerating the transition of the vehicle fleet to electric.

Having extra fuel trucks in New Zealand would also help with distribution, while more in-country storage of diesel and jet fuel was encouraged.

A biorefinery, using waste products supplied in New Zealand, was another efficient option.

Denise Piper is a news reporter for the Northern Advocate, focusing on health and business. She has more than 20 years in journalism and is passionate about covering stories that make a difference.