Fuel crisis: Cost of Government diesel deal with Z Energy to stay secret until it’s paid, will affect Budget

Taxpayers won’t know how much they’re paying Z Energy to procure an extra nine days’ supply of diesel until the money’s already been paid, but Nicola Willis says it won’t cost billions.

The finance minister told Ryan Bridge Today she was unable to say much about the cost of the deal.

She said officials have advised she can’t give even a ballpark figure without exposing the taxpayer to risk as part of the Government’s negotiations.

Yesterday, it was announced the Government had signed a “letter of intent” with Z Energy to procure 90 million litres of diesel.

The fuel will be delivered to Marsden Pt, either as a single cargo or two cargoes. It will be stored in a refurbished tank, which is expected to be available from early June.

The cost of the deal would become public once it had been paid, and it would be funded completely out of the Government’s budgeted operation allowance, Willis said this morning.

“We’ve been doing a bit of a rejig of the Budget to make sure New Zealand’s highest priorities right now can be met and I don’t think there can be any higher priority than ensuring that we’ve got the fuel needed to keep our economy going.”

Finance Minister Nicola Willis has been advised not to discuss the cost of the diesel deal. Photo / Mark Mitchell

Asked why the Government could not just make fuel companies increase their minimum stockholding obligations, Willis said that would potentially add to the cost of fuel at the pump.

There was also not enough spare storage in New Zealand to take that approach.

The deal will give an extra buffer and more flexibility in the system, said Waitomo Group chief executive Simon Parham.

He told Newstalk ZB’s Early Edition with Ryan Bridge the deal is a “good thing”.

“Not only is it a buffer, but it’s some flex in the system that they can use if there are any delays with any cargoes.”

It also sends a message to the public that the system is “rebalancing” across the Asia Pacific region, he said.

Meanwhile, aviation industry CEO Simon Wallace says the cost of jet fuel - rather than supply worries - is what’s hurting his industry most at the moment.

Operators had been hit hard by a 100% increase in the cost of jet fuel as well as avgas, he told Bridge.

Asked how the aviation industry felt about there being no equivalent deal on jet fuel, Wallace said aviation was also a big diesel user.