Oil reserves need 500,000-tonne boost

New Zealand should increase its oil storage by 500,000 tonnes to comply with the target set by the International Energy Agency, according to an independent report released by the Government yesterday.

The report was commissioned after it was discovered in September that New Zealand had oil stocks sufficient for 60 days of consumption, well short of the IEA's 90-day target.

It recommended that 16,000 tonnes above the typical level of storage should be held as insurance against internal security risks.

A further 211,000 tonnes of crude oil or product should be held as insurance against external risks such a disruption in supplies from the Middle East.

"This leaves a gap of 273,000 tonnes between our estimate of the socially optimal storage levels and the amount required to make New Zealand fully compliant with the current IEA target, which is 1,317,000 tonnes," the report said.

It suggested that the four major oil companies operating in New Zealand should pay the cost of bringing stock up to the "socially optimal level".

However, there was a question of whether the Government or the industry should pay for the cost of meeting the difference between that level and IEA's requirement.

The cost of making New Zealand fully compliant would equate to less than 1c per litre at the petrol pump, Energy Minister Pete Hodgson said.

New Zealand should look at holding more than 90 days supply, he said. The Government is seeking comment by February 2 next year.

The country consumed around 5.6 million tonnes of oil products in the year ended September 2003.

The Marsden Pt refinery supplies about 80 per cent of New Zealand's refined fuels.

- REUTERS