By Gavin Evans
June 7 (BusinessDesk) - Gull says its plan to import jet fuel and truck it into Auckland will improve competition and increase the resilience of supply for the country’s biggest airport.
The company has begun the process of joining the joint user hydrant installation - JUHI - at the airport.
Gull general manager Dave Bodger says the firm has undertaken the first step – seeking approval from Auckland International Airport, with the support of Air New Zealand – but has no real idea how long the process may take.
It is prepared to invest in the facility and may need to get a more efficient process for discharging tankers there.
“We are keen to sell jet fuel at the airport. We know that we need to truck it there,” he told an inquiry into fuel resilience in Auckland yesterday.
“The benefit for customers is that they have some greater choice and that we would then have an alternate supply chain, including ships sailing to New Zealand with refined fuel, storage on wharves and a different road route to the airport and potentially to the wing tip.”
Gull, acquired by Caltex Australia in 2017, has operated in New Zealand for 20 years and has a major fuel import terminal in Tauranga.
Its parent company’s Lytton refinery in Brisbane produces 6.2 billion litres of fuel annually – about 12 percent of it jet fuel – while its Ampol business sources crude oil and finished products from around the world and is the biggest petroleum importer into Australia.
Caltex Australia – no longer connected to US-based Chevron and listed on ASX - sold about 20.4 billion litres of fuel last year in Australia, New Zealand and the Philippines.
The hearing yesterday debated the relative roles of trucking jet fuel into Auckland airport to meet peak period demands and the arguments for upgrading the fuel pipeline from the Wiri fuel terminal to the airport.
Bodger noted that Christchurch airport receives all its fuel by truck and Coolangatta in Queensland receives 200 million litres annually by truck. Melbourne airport receives 650 million litres by truck a year.
Auckland airport is concerned about traffic congestion around it and is keen to avoid extra tanker movements if it can.
Bodger noted that about 1.5 billion litres of diesel and petrol are delivered by truck in Auckland every year.
“That is happening without a whisper or a comment from the public and you do not see service stations dry,” he said. “Trucking is safe, efficient and reliable.”
The hearing is looking into the September 2017 shutdown of the main fuel pipeline to Wiri in South Auckland from the Marsden Point refinery. That slashed jet fuel supplies for 10 days, required tight rationing among airlines, the cancellation of many services, and the emergency conversion of other tanks around the country to store jet fuel.
The hearing is particularly considering the reliance of the region, and the airport, on the performance of the refinery’s pipeline from Marsden Point, the Wiri terminal, and the Wiri to airport pipeline. The failure of any element of that chain would cut fuel supplies.
Several oil company executives acknowledged that the only way of reducing that risk from a single point of failure was to develop an alternative supply chain.
Bodger noted that extra storage and capacity upgrades may be required at Wiri and at the JUHI, but that did nothing to address the single point of failure risk.
Gull has a history in fuel management and in storage construction. Ultimately it will be up to it to prove Gull can offer a competitive jet fuel supply into Auckland.
“We believe the market can actually make that decision and the market would, through that, produce an alternative supply chain.”
Refining NZ makes most of the country’s jet fuel.
Chief executive Mike Fuge agreed that a second source of supply would improve competition and would provide “incremental resilience” for the 8-10 percent market share Gull may achieve.
But he said fuel trucking added risk from human error and the potential for fuel contamination.
Fuge said single asset pipeline systems can provide very resilient and efficient life-lines long-term, and he urged the committee not to consider fuel trucking from Tauranga as a complete alternative.
Timely investments at Wiri, JUHI and on the Wiri to airport pipeline are needed and he did not want to see those efforts “distracted” by the prospect of a partial secondary supply from elsewhere.
“It’s a question of priority and the degree of mitigation.”
The hearing concludes in Auckland today.