The diesel crisis contaminating NZ

GREG ANSLEY looks at how the diesel scandal unfolded and finds out why the oil industry took so long to tell the country.

Late in the afternoon of Friday last week Tony Friedlander, chief executive of the Road Transport Forum, was summoned to a meeting with oil industry and Government officials in Wellington's Mobil House.

Shortly afterwards, Peter Jones, president of the Federation of Commercial Fishermen, received a telephone call advising him to catch the television news that night.

In Greymouth, the crew of one fishing boat was reflecting on the increasingly dense muck that had been cleared from the three filters protecting the boat's fuel lines from diesel tank to engine.

And 800km to the east of Christchurch, Lea Clough's fax spat out a brief note warning of yet another cut to the Chatham Islands' diesel-powered electricity grid.

New Zealand was about to learn just how fragile its economic veins could be.

That evening the NZ Refining Company issued a statement through the Press Association (NZPA) warning of problems with locally refined diesel possibly associated with an additive to winter-grade fuel, and advising users to see a mechanic if engines were running rougher, losing power or cutting out.

By Saturday, the oil industry was operating a war room in the James Cook Centra Hotel on The Terrace, Wellington. Around the country, a mountain of pennies dropped.

For several weeks gremlins had been at the nation's diesel engines, with their victims blaming themselves, their maintenance or anything else that seemed likely. No one suspected a furtive clogging of mechanical arteries.

Alarms began clanging as the fishing industry pondered the scale of potential losses, trucking companies worried about lost time and business, and farmers kept fingers crossed as they fed stock and sowed autumn crops.

Engines lost power, rural nights rang with the curses of people stumbling through the dark to tend to coughing generators and emergency services frantically worked to ensure their fuel was clean.

If there was a blessing, it was, said the Automobile Association, that few vehicles had so far broken down because of contaminated fuel, but it warned that hard use of four-wheel-drives in bush country over the long weekend could be risky.

Details were scarce about the specific cause of the problem that had crept up on New Zealand. The name, nature, supplier and technical specifics of the additive, and of its use, were closely guarded by NZ Refining, which produces 90 per cent of the nation's diesel at its Marsden Pt plant.

Much of this was because the detailed cause remained a mystery. It was also because NZ Refining wants to consider legal options.

And there is a growing realisation that while horror stories abound, the real costs are probably far less than at first feared, with only a tiny proportion of the nation's commercial diesel users reporting serious problems, fishing fleets and emergency services rapidly being refuelled, and an expected fast dilution of dirty fuel with clean supplies on land.

But there is no doubting the fright the country received - nor the potential damage that a serious corruption of New Zealand's diesel supplies could cause.

Diesel is used to power fire engines, ambulances, emergency back-up generators, nine out of 10 of New Zealand's trucks, most of the fishing fleet and coastal traders, virtually all tractors and farm machinery, 15 per cent of the country's cars, and thousands of smaller generators that run anything from refrigeration units to remote farms. Their vulnerability was exposed by a process that began at Marsden Pt in mid-March, when NZ Refining switched to producing its winter fuel, which includes an additive designed to improve the refinery's profitability and the cold-weather performance of its diesel.

Although the supplier was new - selected after an international tendering process - winter additives have been a norm for at least 15 years, used in North America and northern Europe.

When temperatures plunge, ice crystals form in diesel, blocking filters and choking the engine's fuel supply. Wax crystals first become visible at what is called the cloud point. About 2 deg C cooler they reach the cold filter plugging point (CFPP) and begin to film across engine filters.

Additives lower the CFPP from, for example, -2 degrees C to -15 degrees C, which allows improved fuel flow and enables the refinery to produce more diesel per given volume of oil. Specifics vary across different grades of fuel.

"It's both commercially and technically sound," says NZ Refining's general manager, Alan Davey. "And it's necessary. If you continued to use summer grade in the deep south it would go solid in the tank."

The refinery produces three winter grades - for northern, central and southern New Zealand. The further south the diesel is going, the more additive is used - which is why the problem of clogging filters first appeared in trucks.

In theory it should never have happened. The corrupted diesel passed regulatory tests and was not released until after tolerances were reduced well beyond normal levels: the residue clogging filters is made of particles of between 2 and 10 microns (a micron is one millionth of a metre).

"Every batch met every [standard] test," Davey says. "What we have here is a phenomenon not shown up by any of those tests."

But the corruption was there, and it emerged in spasmodic, widely separated and initially largely unremarked incidents in which a relative handful of truck operators and fishermen began to change filters more often than normal.

Some were clearly abnormal - boat captains reported changing filters three or four times more frequently, and one replaced his 11 times in a five-day voyage from Auckland to Napier - but many assumed the problem was theirs.

Friedlander says the Road Transport Forum was aware only that some trucks had experienced loss of power or ground to a halt, mainly in Nelson and Dunedin.

And Jones says most commercial fishermen affected by the corrupt fuel thought it was the return of the diesel bug.

The bug is a bacteria that lives in water trapped in the base of fuel tanks. It swims into diesel to feed on components such as sulphur and returns to the water to multiply, growing into mats as thick as seaweed that can later break up and choke fuel lines.

Trucking and fishing sources have conceded that some of the problems now ascribed to corrupt fuel could, in fact, have been caused by inadequate maintenance, the bug, or other unrelated factors.

But on the Wednesday before last the murmuring grew too loud to ignore. At midday the oil companies asked Davey to check his diesel. The following day laboratory tests showed that filters were being blocked by a chemical closely resembling the additive that should have dissolved.

The findings were confirmed just after lunch on Friday. The warning statement was handed to NZPA; at 4 pm Friedlander sat down in Mobil House to be given the news, and the oil industry began setting up its war room in the James Cook Centra.

The news broke like a thunderclap across New Zealand. With fears for both life and loss of insurance cover, tuna and lobster boats agonised over putting to sea at the height of their seasons and emergency help lines fielded a flood of inquiries.

The remote Chathams became a microcosm of the nation. "You don't move on the Chathams without the use of diesel," the islands' mayor, Pat Smith, said.

There are three main industries on the islands - fishing, farming and tourism. The electricity grid operated by Enterprise Trust is powered by diesel. So are the generators that run the outlying farms and settlements, and most of the vehicles, together chewing through about 8000 litres of fuel a day.

This is a critical time for the islands. The lobster season is at its seasonal peak, with lobster bringing in about $50 a kg, and farms are moving their livestock off aboard the MV Jenka on its boomerang route between Napier, the Chathams and Timaru.

Several weeks ago trouble hit as clogged filters affected the main electricity generators. In Smith's house the television would die, while the fax in the office of Clough, the fishermen's federation representative, would shoot out a brief warning note. The cutouts were brief, but ominous.

In the harbour the diesel-powered fleet of about 50 boats faced the same painful decisions as their mainland colleagues: to put to sea or stay anchored and lose heavily. By the middle of this week none had had major problems, but the thought of suddenly stalling in heavy seas or strong currents close to the islands' rocky shores raised a grim spectre.

If boats didn't sail, rich catches and lobster pots worth up to $80,000 were at risk. If they did, they would have to move pots to deeper water - maybe losing two of the nine hours of available daylight - or even bomb other pots: the legal, but socially unacceptable tactic of sending pots down close to those of other operators.

The captain of one boat told Clough his company had okayed trips so long as safety came first and the boats worked offshore; another owner-operator decided to put to sea with 12 spare filters and an anchor lashed to the side, ready to be quickly freed by axe if the engine failed.

On Wednesday afternoon, as suppliers rushed to deliver clean fuel to mainland emergency services and fishing fleets, a Shell spokesman said 70,000 litres of fresh diesel would arrive on the Chathams within seven days.

But for the islands, as for all of New Zealand, the great diesel scare has been an unwelcome jolt.