Are we forgetting national self-sufficiency?

TECHNOLOGY Self sufficiency déjà vu?

New Zealand could be forgetting a hard-earned lesson about national self-sufficiency

The uncanny parallel between our wartime experience of the difficulty in ensuring vital supplies reached us from thousands of miles away with the present major disruption to our global logistics caused by the Covid pandemic, should give pause for thought.

Our only oil refinery, producing 85 percent of the country's jet fuel and 67 percent of petrol and diesel, is to become an import terminal reliant on foreign suppliers. Our mandatory strategic fuel reserve of 90 days is reportedly only 20 days, with the balance held overseas.

Any national security risk analysis recognising global supply problems must better justify this significant threat to our continued social and economic wellbeing.

The loss of our only oil refinery means:

• Dependence on availability from a variety of overseas suppliers. • Exacerbates the ban on new oil and gas exploration. • No capability to upgrade sub-standard imported product. • Inability to extend fuel reserves beyond our International Energy Programme (IEP) commitment of 90 days.

• The loss of 240 skilled staff and impacting many skilled contractors.

Memories are short: conflict in the Middle East saw oil prices soar and fuel supplies constrained for years. Damage to the pipeline supplying 90% of Auckland’s fuel and nearly 30 percent of New Zealand’s total fuel requirements, caused massive disruption throughout our transport system, crippling international flights and dramatically highlighting our vulnerability.

The transition of New Zealand’s transport sector from fossil fuels to efficient, cost-effective alternatives will realistically take years. Meanwhile, our fuel security is at risk, exacerbated by the uncertainty of future supply due to international

events beyond our control. Increasing local storage capacity is a longer-term challenge.

Local chemical production in ageing and uneconomic facilities giving way to importing finished product from modern Asian and Middle Eastern ‘Super plants’ makes good business sense. Conversely, importing finished products also means a loss of valuable expertise as the skilled industry veterans needed to attract and mentor the next generation of much-needed professionals are no longer available.

Covid constraints not only limit our ability to import the Chemical Engineers, Chemists and chemical industry experts we need. Those already here are finding it increasingly unattractive to remain, due in large part to constantly changing and frustrating border controls and immigration policies, coinciding with fewer job opportunities.

Australia is decommissioning two of four refineries, leaving two operating for up to six years while additional fuel storage is built. These two will receive government subsidies worth A$2bn to upgrade in order to meet cleaner fuel standards and preserve thousands of jobs.

To navigate the present, we must heed the lessons of history

While it may not be purely economic to continue upgrading our only refinery to compete with foreign refineries, a strategy based on a small reserve, coupled with the inability to manufacture vital transport fuels, with New Zealand at (‘best case’) the end of an 8-10 day delivery schedule (without the complications of Covid), with priority going to higher-paying customers and shipping possibly denied access to vital waterways, seems a highrisk gamble. A ‘worst case scenario’ of fuel rationing would rebound throughout the economy.

The plan for the refinery closure assumes not more than a possible three-day delay in delivery.

Our logistics sector, struggling with pandemic disruptions, reduced ship visits, overwhelmed local storage capability and disrupted shipping due to weather, accidents, terrorism and hijacking, may not find such optimism reassuring.

A side effect is the loss of ex-refinery Sulphur, increasing pressure on fertiliser manufacturers targeted by NGOs campaigning against Phosphate imports from the Western Sahara.

Should the global supply scenario worsen, New Zealand’s economy would be hard hit.

The chemical industry is inextricably entwined in every aspect of our national security and wellbeing, from providing the products we all need to sustain our quality of life, to contributing our scientific expertise overcoming challenges as diverse as pandemics, achieving climate change aspirations and even going ‘where no man has gone before’. Closure and downsizing of major New Zealand industry accelerates the loss of scientific capability.

National self-sufficiency seems restricted to simply modelling social and economic ’what if’ scenarios which are neither guaranteed nor consistently accurate. The evolving Covid virus being one such unpredictable variable, affecting national security.

Given these increasingly turbulent and unpredictable times, food and energy security (including fuel) must be key considerations in safeguarding our society.

Perhaps we would be better served to increase the resources required to enhance our education, healthcare and scientific capability, improving our national resilience, including food and fuel security, reinforcing our combined social and economic wellbeing.

The evolution of our crude oil refinery into a terminal is a well-argued business decision. The continuing loss of key strategic industrial resources, involving irreplaceable expertise, increasing our vulnerability to accessing vital commodities, jeopardising our well-founded national self-sufficiency, surely deserves a more comprehensive risk assessment.

Barry Dyer is chief executive of Responsible Care NZ.

The views expressed here may not necessarily be the views of Responsible Care NZ.

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