Buying reserve fuel stock from overseas will cost up to $13 million annually once Refining NZ stops refining crude - and a warning of dire consequences in the event of prolonged global supply disruptions.
These are key points in a report to Energy Minister Megan Woods.
The report on fuel supply resilience without a domestic oil refinery prepared for Woods by the Ministry of Business, Innovation, and Employment highlights, among other things, the option of increasing minimum levels of fuel stock.
The report was prepared prior to Refining NZ board's final decision to convert the refinery into a fuel-only import terminal from April next year.
Parts of the report have been redacted, particularly around the financial costs of holding domestic reserve stocks, due to commercial sensitivity.
The report says cost of compliance with the 90-day stockholding obligation under the International Energy Agreement will be up to $13m per annum to buy more reserve stock and while the redundant crude tanks at Marsden Pt could be converted to hold domestic reserves, costs would be higher but the approximate figure has been redacted.
"Loss of ability to refine domestic crude oil could leave New Zealand more exposed to the severe consequences of depleting all fuel stocks if unable to import any fuel for a sustained period," Woods said.
She said a disruption of this kind was unlikely in the next 10 to 15 years but could not be discounted.
"I acknowledge the consequences of such an event would be serious and this risk warrants careful consideration."
Woods cited two refineries in Australia that required substantial taxpayer funds to stay afloat during Covid, saying it was unlikely New Zealand could be supplied by them during a "closed border" event.
Any future decision to obtain domestic fuel stocks could incur annual costs which may have to be recovered through existing levy on petrol and diesel sales, she said.
Closure of the refinery, she said, would impact on the supply of food-grade liquid carbon dioxide used in the food and beverage sectors and in water treatment plant.
A Refining NZ spokeswoman said as was presently the case, Z Energy, BP and Mobil would determine how much fuel was held on site at Marsden Pt at any given time from April 2022.
She said the company was supportive of government developing its policy position on domestic fuel stockholdings and a BioFuels mandate policy.
"Marsden Point has huge potential being a large industrial consented site, with deep water port access, large electricity and gas connections and a very capable workforce."
Woods said work was under way on fuel stockholding options to ensure a smooth transition to an import-only terminal and there would be consultation on those options in the coming months.
"Advice commissioned by MBIE indicates New Zealand's fuel supply is expected to remain secure because we can source fuels from multiple refineries in multiple locations to minimise supply risks and MBIE regularly commissions reports on the oil and fuel supply chain in New Zealand to inform the management of domestic and international disruptions," Woods said.