Refining NZ could lose up to $15m after fuel pipeline breach

Energy Minister Judith Collins has offered the fuel companies assistance if needed (photo: Jerry Yelich-O'Connor)
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Refining NZ says a pipeline breach could cost the company $10-15 million in revenue and take longer than the initially expected two days to repair.

In a statement to the NZX, the company says a crack in its pipeline from the Marsden Point refinery to Wiri near Auckland Airport is eight kilometres south of the refinery at Ruakaka. A leak occurred last Thursday following an incident with an excavator.

It had expected to install a clamp on the damaged section of the pipe but closer inspection after excavating the pipeline has shown that the damaged section needs to be replaced,

The company hasn’t confirmed how long it will take to enact the repairs but said yesterday it may be 10 to 15 days.

Once the repairs are complete, the pipeline will be run at a reduced (70-80%) capacity initially, the statement says.

Refining NZ also says early identification and containment has minimised the environmental impact of the leak, and the recovery of the leaked product is almost complete, although up to 70,000 litres of jet fuel may have already leaked from the damaged pipeline.

“We have maintained close contact with our local community and are continuing to keep residents updated on progress with our repairs,” it says.

“Financially, the impact is expected to be twofold: reduced pipeline income and reduced refining income as Refining NZ will have to slow-run or stop units due to constraints in its tank farm.

“While too early to estimate with absolute accuracy, Refining NZ expects that the revenue impact will be of the order of $10-15 million.”

The leak has disrupted jet fuel supply at Auckland airport, prompting carriers to restrict fuel use by consolidating passenger numbers and cancelling flights. Energy Minister Judith Collins has offered NZ Refining and jet fuel suppliers Mobil, BP and Z Energy assistance if needed. 

Z Energy says its airline customers are already on fuel allocations, which will mean they have to bunker fuel and refuel at other domestic and international locations. It says fuel supplies nationally were healthy and this latest disruption won't "materially impact company performance." 

Air New Zealand says the disruption is “impacting all airlines operating into and out of Auckland Airport and limiting the volume of jet fuel able to be uplifted to 30% of normal usage.”

The airline estimates about 2000 customers per day will be affected by flight cancellations over the next couple of days as it works to consolidate passenger loads and minimise fuel usage.

Details of flight cancellations are available on Air New Zealand’s Travel Alerts page.

Air New Zealand chief operations integrity and standards officer Captain David Morgan says the problem is industry wide.

“We are doing all we can to minimise the impact on our customers. However, we also need to take all prudent steps to conserve jet fuel supplies at Auckland Airport.”

NZ Refining shares last traded at $2.48 and have slipped 4.6% this year, while Z Energy shares closed on Friday at $7.31 having edged up 0.7%. Auckland airport shares were last at $6.31 having gained 1% this year and Air New Zealand stock closed at $3.25 having climbed 48% this year. 

A 2012 report by the Ministry of Business, Innovation and Employment suggests a major disruption to the “Refinery to Auckland Pipeline” (RAP) could cost $466 million and a shutdown of nine days would cause a 17% shortfall in petrol and diesel.

It also says a repair time of longer than a week would risk international tourism and exports.


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Terrible timing for National as our nation's biggest city starts running out of fuel and it also leaks out into the environment! Will pay right into the Green's hands.

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Only down 8 cents at the open - I suggest the repairs and financial impact are going to take longer and have more impact than the company is currently budgeting for.

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Another vital piece of infrastructure that has lacked maintenance and forward planning

Whilst the pipeline is privately owned isn't it governments role to ensure that the public and business communities are catered for which would normally involve a back up plan in case of emergencies like this

Luckily we don't have a combat ready air force

I wonder when Minister Collins will wake up - it took her to the weekend to do anything about the fuel margins collected by the oil companies and that was only because it was election time

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I agree with you The Scribe. If our air force at Ohakea had been relying on the Marsden Point pipeline we wouldn't have a prayer.

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If the comments were not so pathetic from Scribe & The Moose one could laugh. This problem has noting to do with National or any political party. It is a private commercial matter. The Scribe suggests that National be heavily involved in all commercial business, of course this is a Labour/Greens manifesto whereby everything is governed by the government a communist/socialist stance that means vote Labour & Greens and watch the country go backwards. Act is starting to look very good.

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So we just sit back and let others control our destiny

Just for the record the last major energy crisis was the Auckland power crisis in 1998 also under a National governments watch - another example how Nationals model doesn't work

The current issue is the governments for a number of reasons
Don't they own Air NZ ? So as owner shareholder of Air NZ they need to be more proactive and secondly NZ business needs to know that they have a reliable major airport for exports and international business travel

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The power crisis in Auckland was an issue 20 years in the making and nothing to do with National government. Why don't you just be honest Scribe you obviously want a communist government where the government owns and controls everything your continued blame directed at the National government for all issues known to man is illogical and boring.

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It might be boring to you but it's a fact
Nationals answer to everything is to blame someone else - it's always an issue brewing for years

'20 years in the making' - 15 of those years were under a National government

Someone has to take responsibility and that primarily lies with government - to manage NZ Inc
Why else do we have government

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Because Labour fixed it when they were in power.. oh wait.

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The power crisis in saw blame, by an independent review, attributed to Mercury energy and saw them broken up and the power distribution approach round NZ changed. How is that National blaming someone else?? As I said your comments are illogical and come with the same boring conclusion vote for an inexperienced 30-year-old because she happens to be leading Labour. What would be more useful is propose a sensible approach like how can the future port strategy, with tank farms, or rail mitigate pipeline dependency. That would make for a good debate, it would certainly challenge Winston's North Port consideration.

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The government blamed others at the time and then had the usual enquiry and fixed the issue by breaking up Mercury and forming Vector

But isn't that what National are elected to do - not me or you to come uo with ideas of how to fix the issue - to ensure that vital infrastructure is secure , reliable and has a back up plan
All vital infrastructure needs to be protected

Your suggestions makesense but we need to hear this from government and proactvely not reactively

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They were digging for kauri.... as condoned by Judith. The Taniwha has spoken and Nationals fate sealed. Dug their on hole. Almost worth the enviro damage to have them gone.

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I agree JP ... the comments are just absurd. Its a damaged underground pipe and a commercial matter for NZRC - blaming the government probably requires a medical check up.

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Just a technical point Ross - I'm certainly not disagreeing with your argument.

I believe the pipeline is above ground for nearly all of its length so diggers and things don't dig it up or run into it....

The damaged area of pipe is overgrown by vegetation according to some reports. This may be a company or subcontractor maintenance issue however the digger operator had to have willfully ignored his location while removing the kauri log.

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Please point out where I said it was the Government's fault? I'll wait...

If you read my comment again you'll note that it inferred that there are political consequences for this accident as environment is currently one of the key political issues on the table right now. This brings it in to the spotlight to the public. To ignore it is just plain ignorance...

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There was a great interview from Sjoerd Post (CEO of NZ Refining) on RNZ this morning - which I note RNZ don't have on their website likely because it doesn't apportion blame to the government. He confirmed JP's comment re it being commercial matter when he said that to create redundancy it's a greater than $300m project with would require an ROC of $35m per year which would need to come from customers. He said that given it's a piece of private infrastructure that would likely never be used it would be a hard deal to finance! The owner of the pipe isn't blaming the government - and nor should we!

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Very well spun but it's about someone taking responsibility
If NZ Refining don't see the commercial benefit they should be told to provide reliable supply or they will lose the rights to refine and distribute fuel in NZ. Simple as that. And if necessary legislate

We can't have the oil companies dictating their terms and we also need a strong government to manage the infrastructure

Sitting on your arse and letting NZ Refining decide the outcome as you allude to, is not acceptable

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Good points well made, The Scribe. We should nationalise the fuel companies at the same time as we buy back the electricity companies.

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How's that going to work when these oil companies provide the supply also? Its called vertical integration, and when you're a multi national you can create the revenue anywhere. Fletchers have been crewing us for years on the same basis.

If the government had of bought out Fletcher Energy rather than Shell, we could have continued to develop our own supplies. All Shell did was milk this company, and provide no further investment into finding new local supply.

All we know is these multi nationals have found oil, but dont want to flood the market. If they manipulate the prices like they have done in the past, anything is possible.

How could a small country like NZ ever be able hope to control these large companies. The market driven ideology that started with Rogernomics was near going to work in little old NZ; especially if you let large overseas investment in.

And to think this idealogy all came about from Thatcher (who was a warmonger, Reagan who was a second rate actor and Roger Douglas who was a bankrupt pig farmer.

The current economic model is gone way past broke, and we need change.

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I smell a rat. We aren't being told the full story.

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Jacinda's really made another "Captains Call" howler. Told the world this is "Nationals" fault. A pipeline...owned by a private company...damaged by a digger looking for Kauri...on a line that has worked fine for 30 yrs.

Oh, and Labour got a report that it was needing looking at back in 2005 and ignored it.

LOL.

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many will be surprised at this and the surprises are many...surprise at this happening...surprise the pipeline is under such high pressure(gets higher as it changes direction)....surprise it runs through fully built up suburbs in Auckland and hardly anyone knows and ..surprise at the unmanaged human factors which are inevitable....surprise at the exposed vulnerability of supply....not surprised that many years ago a number of intelligent technical people warned of this happening on this pipeline and were told it couldnt.If this happened in suburbia where the pipleline travels the scale would be a major emergency.Every inch of this pipeline over its entire journey now needs to be checked.

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Please update the story now, there was no digger looking for Kauri

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Please elaborate, as it is still being widely reported as the likely cause.

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Will be interesting to see whether the airlines will support Auckland Airport if they propose investment in additional fuel storage with associated increases in charges?

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Auckland could do with a refinery or tank farm close to the city, like on the waterfront or somewhere for it's energy security. Or a nuclear power plant in Otahuhu perhaps?

Aucklanders hate industry and infrastructure, preferring unicorns and candy-coloured green and red dreams of how cities function.

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The root cause of the Auckland power crisis was 110KV underground cables that were never installed properly back in the 50s and 70s. The cables weren't covered with the correct backfill, meaning that they overheated when subjected to full load. When their actual capacity was calculated after the outage, all 4 cables were needed to meet full demand. But it was previously thought that just 1 was capable of meeting full demand.

As for the pipeline, considering the failure was caused by someone digging where they shouldn't have. And they didn't immediately report the damage. It is extremely difficult and expensive to build redundancy against such events.

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Typical of poor NZ corporate management.
Where is the backup plan? Seems like nowhere to be found! That is the issue.
Is it prudent to have only 1 supplier as an essentially business input?
How much has airport activity increased in the last 30yrs since the pipeline was installed. Why does the airport not have sufficient onsite storage to mitigate disruption for at least a reasonable period? Pipes break, it is not rocket science.

This is 3rd world stuff. Sure it isn't directly the governments fault, however the public would like to see followup action being taken when users of the country's main airport are held to ransom by inept management.
Heads of NZ Refining and AIA should be held to public account. Lets get some liability for the disruption placed on the heads of company directors - a sharp pencil pressed against their spine.

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Auckland an international city - Yeah right.

It's great that things like this happen every so often to keep us in check. Single point of failure...tsk tsk tsk..

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An "external force" in a Northland field led to
Auckland Airport's primary jet fuel line being damaged, but local residents are adamant the land was only used for grazing.

https://www.stuff.co.nz/business/96941407/digger-scraped-and-cut-crucial...

How much were some on here and locals paid to say land only used for grazing? when it was just showed and confirmed that a digger did do the damage on both TVNZ 1 and in the Herald?

Potentially misleading locals, like email provoked farming yokels not really a good look for some people, are they? Who has got what to hide over this matter?

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