The Daily Blog Open Mic – Monday – 5th October 2020

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Announce protest actions, general chit chat or give your opinion on issues we haven’t covered for the day.

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5 COMMENTS

  1. Incredible. Even while the Mackenzie Basin is on fire, Ms Collins promotes her climate changing measures! TVNZ, from a Newstalk Interview

    Collins also said oil and gas reserves should be tapped into to boost the economy after the pandemic. She said it wouldn’t have a large impact on climate change.

    “Gas is something that is part of the world. We have potential to be, basically, the North Sea in the south, with the seismic testing I have seen, when I was Minister of Energy and Resources, off the East Coast of the South Island.”

    She added: “And that’s how places like Norway became so rich.”

  2. Energy policy -and the sticky question of tar?

    Pat Basket’s recent article in Newsroom about Hydrogen and future fuel options appears to have stimulated little debate
    https://www.newsroom.co.nz/why-hydrogen-is-not-a-cure-for-emissions

    Hardly surprising though , because we as a nation have been operating in a near vacuum of thought and planning around the single most strategic sector of our economy for the past 15 years.
    What little in the way of “policy” initiatives in the term of this government has been put forward by the Green party and could at best be described as wishful thinking and more accurately likened to fresh seagull guano.

    The announcements across the Tasman last week regarding the ongoing operation of Australian Refineries need to be analysed and discussed thoroughly in the context of the mooted changes to Refining NZ’s long term plans and the future of NZ’s only oil refinery and source of the full complement of liquid fuels and and other essential petroleum based products.

    Whilst a lot of the current energy policies of Australia’s Liberal-national coalition government are arguably out of step with need to address with urgency the reduction of emissions of Greenhouse gasses , the decision to bolster storage capacity and financially support their existing refineries who are experiencing the same difficulties as Refining NZ in operating profitably as a direct consequence of the ‘dumping ‘ of cheap refined fuels from the massive State owned Chinese refineries.

    https://www.canberratimes.com.au/story/6922787/federal-government-to-spend-211m-on-fuel-security-and-saving-refineries/
    https://www.theguardian.com/australia-news/2020/sep/14/government-open-to-making-australian-motorists-pay-to-keep-fuel-refineries-open
    https://stratasadvisors.com/Insights/2019/11202019-Downstream-Asia-Refining-2019-Roundup

    It is blatantly obvious that China , under it’s current leadership , is intent on controlling all aspects of it’s massive trade to the best of their ability and Canberra has at least recognised that liquid fuel security is essential to avoid becoming a dependant client state.

    As a consequence to the economic upheavals caused by politically induced oil shortages in the 1970’s the International Energy Agency agreement was put in place , which commits Nations to having 90 days worth of fuel reserves, but Australia and New Zealand use offshore and on sea in transit oil as part of its reserves. i.e. a significant part of our treaty commitments are either stored overseas or in transit , mainly as unrefined crude in large tanker ships.
    Any possibility of actual warfare , trade warfare & embargo demands that we must prioritise our strategic reserves and ongoing access .

    The strategic nature of liquid fuel supply was the the reason for building and subsequently upgrading the refinery at Marsden Point and that is more relevant today than it has been at any point in the past 30 years.
    Political and economic uncertainty grows daily and the the advantages we have created through a well managed response to the pandemic will quickly disappear in the next 2 years if we adhere blindly to free market philosophies in strategic areas of our economy.

    The closure of the Mardsen Point refinery will increase the energy cost of all the classes of the Petroleum products we consume and will have to import separately .

    A Role for Government?

    Fuel is a significant source of government revenue
    The fuel excise portion on petrol includes:
    • 70.024 cents – National Land Transport Fund
    • 6 cents – ACC Motor Vehicle Account
    • 0.66 cents – Local Authorities Fuel Tax
    • 0.6 cents – Petroleum or Engine Fuels Monitoring Levy
    In addition, GST is collected on the overall price of fuel including excise. The GST on excise amounts to an 11 cents per litre “tax on taxes”

    Refining NZ’s financial performance has been reduced by lower margins on refined petrol and diesel as result of foreign refined product , aka ‘the Gull effect’.
    Greatly increased Electricity costs resulting from the Key government’s electricity ‘reforms’
    -“electricity accounts for around a third of the Company’s cost of operation. Refining NZ uses around 31% of the electricity consumed in Northland.”
    https://www.mbie.govt.nz/dmsdocument/4906-refining-nz-submission-electricity-price-review-options-paper-pdf

    The inevitable rise in the cost of Natural gas , a consequence of declining supplies resulting from government policy to ban ongoing Hydrocarbon exploration . The relatively low cost of gas over the past 6 years , the result of shutdown of gas powered electricity generation has insulated Refining NZ from the increasing over production in Asia and had the benefit of utilising an indigenous resource as a component for the liquid fuel production consumed here.

    The greatest effect from Covid -19 is a 60% reduction in demand for Jet Fuel and likely significant reduction in demand more Marine Fuel Oil , both of which will continue to be effected until boarder restrictions are reduced , though when and why that occurs is anyone’s guess right now.

    The final major product which needs to be considered is Bitumen .

    Until the Covid induced production shutdown Marsden Point processed sour Arabian heavy crude with it’s relatively uncommon Hydro-cracker units which produces ample Bitumen for the NZ road making sector.
    Under the current restricted refinery operation Bitumen production is irregular and if the Refinery closes down it will cease.

    The announcement today that the Refining NZ will cease Bitumen production and handling altogether needs serious consideration

    2020 ushered in the new IMO Marine fuel regulations which have eliminated the cheap but dirty [ sulphur] Heavy Fuel Oil which the globe’s Merchant fleet has used for over 70 years ,replacing it with Light Fuel Oil [ low sulphur ] which differs from automotive diesel only by specialised additives.

    Bitumen production was tied very closely to Heavy Fuel Oil production and the changes underway have had significant impact on the availability and the logistics of transporting Bitumen from the fewer remaining Refineries that produce it.

    The bulk of the Asia Pacific refineries are geared towards plastic production and possible alternative suppliers of Bitumen are in Malaysia , South Korea or California.
    Consumption in Asia is predicted to rise significantly over the next 5 years and the price is predicted to rise accordingly.

    The option of sourcing from the much cheaper suppliers in California carries significantly higher energy cost to NZ as a consequence of the shipping distance and multiple Port destinations required for nationwide distribution.

    With Refining NZ withdrawing from Bitumen production and in all probability not being able or willing to function as an import and distribution terminal , then all Bitumen for the Bay of Plenty , Waikato , Auckland and Northland area [over 50% of NZ population] will have to be imported and distributed through the Port of Tauranga and trucked .

    Given that the text book response to severe economic downturn is an increase in public works of which road making and repair are likely to be prime contenders suggest that Government has big role to play in ensuring that such things are not hindered by shortages of essential materials.

    They need to likewise consider the loss of employment and skills base that the technical , heavy engineering , maintenance , and fabrication functions of the workforce associated with Refining ,contribute to our economy .

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