NZTA tight-lipped on plans for importing bitumen, but Z Energy confirms it will leave market

nzta-tight-lipped-on-plans-for-importing-bitumen,-but-z-energy-confirms-it-will-leave-market

The shutdown of Marsden Point oil refinery is causing ructions in the road building industry which is already under intense pressure.

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Z Energy supplied 70 percent of all bitumen for road building last year. Photo: RNZ

Z Energy is accusing Waka Kotahi (the NZ Transport Agency) of effectively forcing it to quit being the country’s main bitumen importer.

It said it had confirmed the government agency would intervene in a major way in the market, leaving it with “no viable commercial opportunity”.

RNZ confirmed the move yesterday with Z, despite NZTA continuing to remain tight-lipped. The agency said only that it was still “working with key stakeholders and external consultants to optimise the bitumen supply chain”.

All bitumen has had to be imported since the oil refinery stopped making it 14 months ago.

Refining NZ changes its name today to Channel Infrastructure, after a controversial move backed by shareholders but opposed by iwi and its employees, to become an import-only fuel terminal operator.

Critics say this jeopardises the country’s fuel security – even more so than usual when energy supply chains are under pressure from Russia’s war on Ukraine – but the government rejects that.

Z Energy supplied 120 million litres of bitumen or 70 percent of all bitumen for road building last year; 94 percent of that is used by NZTA and local councils.

Tauranga City Council was warned by staff in a meeting last year that a reduction in the number of bitumen importers “means that it will increasingly be impacted by general fluctuations in international bitumen pricing, exchange rates and shipping costs”.

Higher road building costs could push up rates or taxes.

The road workers' working group renews a part of the road with fresh asphalt and levels it for repair in road construction.

Photo: 123RF

The price of bitumen was escalating even before the war began, rising 38 percent in the past year, and is forecast to go up another 12 or so percent in the year ahead.

RNZ began asking NZTA six months ago what was happening with the bitumen supply.

It said then there were “risks” in the market that it needed to find a way to deal with.

In February, NZTA told RNZ that its board “has requested that Waka Kotahi explore options for taking a more active role in sourcing imported bitumen”.

It is understood its board has signed off on the big market intervention, but NZTA has not confirmed this, saying more detail would be given later this year.

NZTA bitumen decision driving Z Energy exit

Z Energy’s national bitumen manager Paul Prendergast said the company had told its customers it would exit the market in New Zealand on 30 June next year.

“The decision for Z to exit the bitumen market is based on confirmation that Waka Kotahi NZ Transport Agency intends to enter the market and supply the vast majority of New Zealand’s bitumen needs from 1 July, 2023,” Prendergast said in a statement.

“A market intervention by Waka Kotahi of this nature whereby they will procure, transport, and distribute bitumen to regional tanks leaves no viable commercial opportunity for Z’s continued participation in the market.”

Z would take steps to wind down but support customers in the meantime, he said.

Waka Kotahi’s move raises questions similar to those debated at the refinery, about the security of supply, but also as to whether other importers, such as Downer, will also pull out, and if NZTA has the expertise to negotiate bitumen deals in the world market.

RNZ approached major road contractors Downer, Fulton Hogan and Higgins for comment, but got none.

Also, the storage of all that bitumen might be a headache if NZTA has to secure a lot of tanks.

It is also up in the air how any subpar bitumen will be dealt with; previously, the oil refinery could be called on to tweak it so it was usable.

Marsden Point oil refinery

Marsden Point oil refinery Photo: 123rf.com

Waka Kotahi commissioned an investigation last year saying it had “identified potential risks in the future bitumen market”.

“These risks relate to security of supply of quality bitumen in New Zealand, cost-reflective price of bitumen at points in the supply chain, and downstream competitive effects within our contracting markets.”

RNZ has requested a copy of its investigation report under the OIA, with the response delayed from 23 March to 8 April.

The Commerce Commission, asked if it had a role due to the possibility of competition concerns, said it was not involved in changes to the way bitumen was imported and distributed.

Te Waihanga Infrastructure Commission said Marsden Pt’s closure had sparked concerns about the stability and security of the bitumen market.

It encouraged Waka Kotahi to consider the implications for projects, said general manager of delivery Blake Lepper.

“We were aware Waka Kotahi was taking steps to ensure future security of supply of quality bitumen at a fair market price, but have not been directly involved in this process.”

Tauranga City Council told RNZ yesterday that it had seen no direct price increases from its roading contractors, but expected that would happen if bitumen prices stay high.

NZTA aware of bitumen’s importance

NZTA said it “understands bitumen is a key strategic commodity”.

“Increasing costs across all supply chain inputs are being noted. These will have a knock-on effect on costs over time for all industries across New Zealand.

“The tanks are full.

“A successful outcome from this work will ensure security of supply, and that good quality, cost-effective bitumen is readily available for all contractors.”

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