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

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.