Fuel pipe owner set for scrutiny
An independent inquiry is needed to examine whether Refining NZ has been following industry best practice in monitoring the condition of its Auckland fuel pipeline, Energy and Resources Minister Judith Collins has agreed.
The acknowledgment came amid indications that Refining NZ’s customers might claim the pipeline operator was liable for losses they suffered as a result of the 170-kilometre pipeline bursting on September 16.
‘‘It will be for the new government to determine what form any inquiry should take,’’ a spokeswoman for Collins said.
Labour energy spokeswoman Megan Woods said the party favoured a government-led independent inquiry to examine the resilience of the fuel supply network ‘‘as well as political management of the risks’’.
Refining NZ chairman Simon Allen said yesterday that some of its customers had ‘‘reserved their position’’ over whether ‘‘force majeure’’ provisions in the company’s contracts with customers should apply, pending the outcome of Refining NZ’s inquiries.
The implication is that those customers could attempt to pursue Refining NZ for the losses they suffered as a result of the fuel leak.
Refining NZ had previously estimated it faced a $12 million to $14m hit on its pre-tax profit from repair costs and lost revenues.
Allen said the pipeline operator believed ‘‘force majeure’’ provisions in its contracts with customers should apply. Such provisions usually absolve companies from financial liability in circumstances where they are unable to meet their contractual obligations because of events that are deemed to be outside of their control.
Refining NZ has blamed an asyet unidentified digger operator for the damage to the pipeline, which resulted in the leak of 70,000 litres of fuel and caused nine days of flight cancellations at Auckland Airport.
It has said the damage could have been done as early as 2014.
Refining NZ said the pressure in the pipeline was increased in the month preceding the rupture to allow it to carry 5 per cent more fuel, but speculated a different factor could have been the final trigger for the break, such as an issue with the pipeline’s electricity supply or a pump.
Refining NZ has commissioned ‘‘asset integrity expert’’ Quest Integrity to carry out an investigation.
Spokesman Greg McNeill said earlier this week that it was ‘‘pretty confident that their findings will concur with our initial conclusions that, given the extent of mechanical damage, the pipeline would have failed regardless of the operating pressure’’.
Refining NZ said Lloyds Register had re-certified the underground pipeline to operate at the higher flow-rate.
Lloyds issued the certification based on data from a 2014 ‘‘pig run’’, which involved scanning its walls using an electric current, and from observations.
Refining NZ has acknowledged a fresh pig run would have detected damage of the nature it attributed to the digger. But it said it was already doing the checks once every five years, which was twice as frequently as required.
The three main customers of Refining NZ’s Auckland fuel pipeline are Mobil, BP and Z Energy. They also own just over half of the shares in Refining NZ.
Mobil spokesman Rob Fitzgerald said it was aware of the statements Refining NZ had made regarding the application of force majeure provisions.
‘‘However, we are currently focused on maintaining the supply of aviation and ground fuels into Auckland. That is our priority.’’