Z, partners eye $32m-plus spend on Auck airport fuel supply

Monday 4th November 2019

Z Energy and its partners in the Wiri fuel terminal believe it may cost more than $32 million to increase jet fuel storage there and on the site’s pipeline to Auckland International Airport.

Z, BP and Mobil are investigating options to increase fuel delivery capacity to the airport after several years of strong international tourism growth through Auckland slashed the forward cover the assets provide to a little over four days of jet fuel demand.

In September, an independent review panel said the government should step in by June 30, 2020 if the venture partners haven’t committed to the necessary investment by then. It found that if aviation growth remained strong, forward cover from Wiri could fall below three days’ supply in 2022 and that the pipeline may not be able to meet peak January demand by 2023.

Z Energy chief executive Mike Bennetts told journalists and analysts last week that government regulation won’t be necessary.

The partners are working on a feasibility study on how to add an additional jet fuel tank at Wiri and how to increase the pipeline throughput by 10-50 percent during the next three years.

The cost of an extra tank was estimated at about $30 million, while the pipeline work could cost $2-8 million, based on preliminary work, Bennetts said. Z would be able to meet its share of those costs within its normal annual asset integrity spending, he said.

The stock last traded up 0.4 percent at $5.38, virtually unchanged so far this year.

Aircraft movements through Auckland airport have fallen in three of the four months through August and national jet fuel demand in the six months through September was largely unchanged from a year before, Z noted. It had increased by 4 percent in the year ended March 31 and 6 percent the year before that.

Bennetts said the recent sharp slowdown in jet fuel demand doesn’t change the venture’s planning for Wiri.

The partners need to settle on a plan so that they can act when there are windows to complete the work, and in a timeframe before it is required. They also need a plan that allows for additional tanks to be added at Wiri longer term.

Wiri has three jet fuel tanks with a maximum capacity of 35 million litres and average working stock of 17 million litres.

The inquiry panel, formed to review the shutdown of fuel supplies into Auckland and the airport in September 2017, heard the airport uses about 4.5 million litres of jet fuel a day.

The airport’s joint user hydrant facility has storage for about 9.5 million litres and the pipeline from Wiri can deliver about 5.3 million litres a day. The inquiry heard the pipeline’s pumps are already running 20 hours a day during December and January - the peak demand months – and that that could reach 22 hours – the maximum feasible - by 2023.

The Marsden Point refinery’s pipeline to Wiri can deliver about 9.1 million litres of fuel daily and ships jet fuel on about 14 days of a 31-day month, the inquiry heard. A drag-reducing agent the refinery plans to trial for petrol and diesel shipments in the first half of next year may lift total capacity by 15 percent and free up more capacity for jet fuel.

(BusinessDesk)

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