The Government has signed a deal with Z Energy to procure an additional nine days’ worth of diesel as buffer against supply shocks linked to Middle East conflict.
Finance Minister Nicola Willis and Associate Energy Minister Shane Jones announced the deal today, saying 90 million additional litres of diesel would be brought into the country.
“Following a contestable procurement process, the Government has signed a letter of intent with Z Energy today to procure 90 million litres of NZ specification diesel.”
The fuel will be delivered to Marsden Point in Northland and stored in a refurbished tank at Channel Infrastructure’s site.
The Government signed off on up to $21.6 million earlier this month to acquire the extra storage capacity, which is expected to be ready by early June.
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The diesel was expected to be delivered in late June or early July.
The procurement comes as national fuel supplies have continued to decline, according to the latest MBIE update published yesterday. Petrol cover sat at 51.8 days, diesel at 41.3 days and jet fuel at 45.7 days — all down from the previous week.
Under the terms of the deal, Z Energy will procure, own and manage the diesel, but the Crown will control when it is released into the New Zealand market.
The Ministry of Business, Innovation and Employment ran a competitive procurement process, inviting fuel importers to submit their proposals to supply additional fuel.
According to the Government, the fuel will be delivered to Marsden Point either as a single cargo or as two cargoes; the Crown’s exposure to any long-term fall in fuel prices will be limited, and the fuel will be held at the direction of the Crown.
Jones said the proposal offered by Z Energy was the best one for New Zealand.
“Z Energy’s proposal delivered the strongest overall advantages, providing value for money alongside practical flexibility around how and when the additional fuel could be used,” he said in a media release.
“Z Energy will procure, own and manage the volume of diesel under the agreement but the Crown will control its release into the New Zealand market.”
The additional supply will not count towards the fuel companies’ minimum stockholding obligations under the law.
Willis said that while the current fuel system continues to serve the country well, additional fuel provides strategic insurance for keeping the economy moving.
“Reliable fuel supply is essential for households and businesses. We have prioritised securing additional diesel because it is the fuel that drives the economy, ” she said.
Yesterday, Regulation Minister David Seymour announced a series of trucking and freight rule changes were being developed to reduce fuel use, including allowing some heavy vehicles to carry more weight per trip and relaxing restrictions for oversized trucks.
New Zealand remains in phase one, which involves increased monitoring but no emergency measures. The Government said it expected options to be ready by the end of the month if the country needed to move up phases.
On-water stocks have continued to trend downwards, though MBIE said the movements remained within normal expectations.