National leader Bill English says he is disturbed a burst fuel pipeline has disrupted people's travel plans but he remains confident the situation will be rectified as soon as possible.
Costs are mounting for businesses hit by the fuel pipeline rupture with airlines forced to make expensive stops at overseas airports and NZ Refining estimating it may cost up to $15 million in revenue.
On the sharemarket New Zealand Refining dropped 3.6 per cent to $2.39, while Air New Zealand stock fell 1.1 per cent to $3.215.
All aviation fuel for airlines using Auckland Airport - which handles about 75 per cent of aviation - is transported in the 168km pipeline which is operated by Refining NZ.
Auckland Airport has said that 41 international and domestic flights have been cancelled since Saturday and other flights have been delayed or re-routed.
Because of limited storage around and on the airport, airlines have been forced to cut usage to 30 per cent of usual, and more severe cuts to flying are expected later this week. It could be late next week before aviation fuel supplies resume.
The airport handles about 465 flights a day and while airlines are concentrating on minimising disruption they are frustrated by the incident.
Air New Zealand said that while it did not expect the disruption to impact its current full-year result, it was "naturally extremely disappointed with this infrastructure failure".
The airline has cancelled four transtasman and 14 domestic flights, but given its operations were not yet meeting the 30 per cent target further schedule changes were now necessary.
Further domestic jet, regional and transtasman flight disruptions can be expected over coming days. In addition to this, most long-haul flights departing Auckland this evening will be required to undertake refuelling stops at Pacific or Australian airports.
"We are continuing to do everything we can to respond to this infrastructure challenge and further disruption is likely as we move through the rest of this week," said Air New Zealand chief operations integrity and standards officer Captain David Morgan.
Other airlines, including Emirates are also being forced to make refuelling stops in Australia, which are costly and can cause passengers to miss connections.
An adviser to the Australian and New Zealand governments on fuel security, Ian Twomey, said the refinery had previous advised his consultancy it had spare pipeline in stock and wrapped and ready to be installed in cases of emergency.
While not an engineer, he was surprised at the time frame for repairs to the damaged 2.3m section of pipe.
"This incident seems to be taking longer than we would have expected. There may be some re-thinking following this that it takes longer to repair," said Twomey, a director at Hale and Twomey, fuel analysts.
Refining said in a Facebook post yesterday that the repairs would take many days because it needed to be absolutely clear that it was safe to work in the area of the failure, which occurred near the refinery following earlier damage to the pipeline.
New Zealand Refinery staff at the site of a jet fuel pipeline leak. Photo / NZME
"The second point is that the work site is in a boggy, peaty area, made even more challenging to work in by the recent heavy rains. Rest assured that we are working as quickly as humanly possible to fix the pipe in order to minimise the disruption we are so painfully conscious of," the company said.
In an NZX update Refining NZ said it expected the revenue impact would be of the order of $10m to $15m.
Twomey said a Civil Defence report in 2012 said there was sufficient storage at Wiri Terminal and Auckland Airport for six and a half days to nine days but the volume of air traffic out of Auckland had increased by 30 per cent since then.
A Ministry of Business, Innovation and Employment assessment of risk to the country's fuel terminals and pipelines last released in 2012 is being updated with latest findings due late this year.
The tourism boom has resulted in jet fuel volumes increasing by close to 20 per cent in the year to March as the number of airlines flying here has increased at unprecedented levels.
In feedback to the 2012 study Air New Zealand expressed concern about the vulnerability of the jet fuel supply and said storage needed to be reassessed.
While a global supply shock would be understood and accepted by travellers, they would not uncritically accept a fuel supply shock that occurs solely within New Zealand.
"Improvements to fuel security should be focused on addressing the ability of local infrastructure to respond to supply shocks."
The airline's submission said package tourism depended on certainty.
"If a country's fuel security reputation suffers through fuel outages which significantly affect flights over a period of time, it will receive international publicity and it will cause some agents to recommend other destinations."
Twomey said the cost of a duplicate pipeline could be up to $300 million but more equally significant would be difficulties getting resource consents on the Auckland isthmus.
"You have an incident once every 30 years but that doesn't justify spending $300 million on a new pipeline. New storage is a different kettle of fish."
A MBIE spokesman said that as a country with a small population, there was a balance between having extremely high levels of resilience in infrastructure and the costs that this imposes on consumers.
The 2012 fuel security review concluded that the infrastructure is generally well managed, the industry is adept at responding to most supply disruptions, and that there is no requirement for significant capital expenditure by the government in the oil supply network.
While it did discuss options, such as building a back-up terminal near the current Wiri terminal or building another Wiri type terminal to the North-West of Auckland, it concluded "they are very expensive options expected to cost more than $10 million per year".
"We appreciate the inconvenience being caused by the pipeline outage. However, given the cost of additional infrastructure that would be very rarely be used, operational responses, such as managing airline refuelling at other airports and trucking in petrol and diesel, remain the best way to minimise any disruption," MBIE said.
