(EnergyAsia, March 31) — New Zealand will soon call for an open tender to build tanks for storing oil aimed at boosting the country’s strategic stockpile reserves, said Energy Minister Trevor Mallard. The decision reverses an earlier proposal to make oil companies pay for the project to enable New Zealand to comply with International Energy Agency recommendation for a 90-day stockpile.
The project could cost as much as NZ$500 million as the government increasingly worries about the possibility of an oil shock. (US$1=NZ$1.5).
Ultimately, the cost of the higher stockpile will be paid for by consumers including motorists who will be charged more at the pumps.
The latest decision has earned the industry’s approval, with the key players BP, Shell and ExxonMobil describing it as “sensible”.
Mr Mallard said: “This decision follows the on-going decline in our oil stocks as a result of rising oil consumption and declining domestic production. It is very important that we meet our obligations to the IEA which is charged with reducing countries’ vulnerability to oil shocks and with helping stabilise world oil markets.
“The IEA agreement also requires oil sharing between IEA members in an extreme emergency. As an IEA member, this may be particularly beneficial to New Zealand given our small size, remote location and oil import dependency.
“We have carefully considered the submissions on a consultant’s report released late last year on options and costs. I believe that tendering best meets the government’s objectives of minimising costs while avoiding any adverse effects on competition between the oil companies and ongoing investment in the sector.”
The government said that New Zealand will be about 28 days under the 90-day obligation in 2005 and 2006, and the shortfall will reach 34 days by 2009.
The cost of the tenders will be met by an increase in the fuels monitoring levy, which is paid by the oil companies based on petrol and diesel sales. The levy is currently 0.025cents/litre and pays for monitoring fuel security and quality.
The new rate for the levy will depend on the outcome of the tenders, but is expected to be about 0.7 cent/litre to 1 cent/llitre spread over all oil products.
Mr Mallard added: “The increase in the levy is not expected to take effect until around mid next year. Legislation will be required to amend the rate and purpose of the levy and considerable design work will be needed to ensure we get the best value for money from tenders.
“The Minister of Foreign Affairs and I also want to explore whether we should hold some of our stocks in other IEA countries. This will require discussions with IEA countries in our region to determine whether this is viable.”