WILL NEW ZEALAND SURVIVE THE CONSEQUENCES OF THE COMING WAR IN THE MIDDLE EAST?
Here is an article I wrote late last year
The simple answer is NO
OCT 17, 2024
Seemorerocks
The short story is that New Zealand, with the closure of its sole oil refinery, imports all of its oil. What is produced in its oil fields is sent overseas for refining.
When I set up a blog in 2012 one of my main concerns was Peak Oil and New Zealand’s resilience (or rather, lack of it) in the face of an oil shortage, so basically I was already familiar with the overall picture.
It is as it was back then but has only got worse.
I decided to ask questions of an AI search engine and the results were amazingly good - I was even able to ask follow-up questions to clarify points.
This is what I found out - and the reality is every bit as bad as I had thought.
Anyone who choses in the current situation to remain ignorant is going to be in for a terrible shock before they know it, in fact, in the next few weeks around the US. presidential election if Israel goes ahead with its suicidal intention to strike Iran.
IMPORTS OF OIL
In terms of imports, New Zealand sources all its crude petroleum from various countries around the world.
In 2022, the country imported $453 million worth of crude petroleum. The primary sources for these imports included:
United Arab Emirates: This country was the largest supplier of crude petroleum to New Zealand.
Australia: A smaller contributor compared to the UAE.
Other minor sources included India, Finland, and Fiji.
So, apart from imports from countries that I did not know even produced oil we get a small amount of oil from Australia.
All the rest comes from ONE source, the United Arab Emirates, (interestingly, not Saudi Arabia).
When I asked the AI it came back to say, the proportion of New Zealand’s oil imported from Australia is approximately 0.01176%.
I asked what proportion of oil comes from the UAE and the answer was;
100% of New Zealand’s crude oil imports in 2022 came from the UAE.
DOMESTIC PRODUCTION OF OIL
New Zealand does produce some oil, in fact, as of 2022, approximately 1.4 million barrels of crude oil which is down from previous years “reflecting the challenges faced in maintaining production levels in existing fields”
The country has limited self-sufficiency in oil, with a net self-sufficiency rate of only 12% as of 2022. This means that New Zealand produces a small fraction of the oil it consumes, relying heavily on imports to meet its energy needs.
But this 12% is sent overseas for refining so can hardly be defined as “self-sufficiency”
When it comes to petroleum our self-sufficiency is ZERO.
The main destinations for New Zealand’s exported crude petroleum are Singapore, Australia, Indonesia, China, and Thailand.
New Zealand’s domestic oil production is relatively modest compared to its overall consumption. As of 2022, the country produced approximately 1.4 million barrels of crude oil. This figure represents a slight decline from previous years, reflecting the challenges faced in maintaining production levels in existing fields.
New Zealand has shifted to relying entirely on imported refined petroleum products to meet its energy needs. This means that instead of refining crude oil locally, New Zealand now imports finished fuels from refineries located overseas.
The majority of New Zealand’s oil production comes from the Taranaki Basin, which is the primary area for petroleum extraction. The key fields contributing to this production include:
Maui Field
Pohokura Field
Kupe Field
Kapuni Field
These fields have been operational for several decades, and while they continue to produce oil, their output has been gradually decreasing due to natural depletion.
This is important to know:
All crude oil produced domestically is exported since the Marsden Point refinery, which was previously operational, closed its refining capabilities in 2021.
Therefore, any crude oil extracted is sent overseas for processing.
MARSDEN POINT OIL REFINERY
The Marsden Point refinery was opened 1976 by the Muldoon government after having been commissioned in 1963 and until being closed in 2022 was New Zealand’s only oil refinery.
It “was set up by the Muldoon Government with considerations focused on enhancing energy security, promoting economic growth, developing infrastructure, implementing government policy for national self-sufficiency, and addressing early environmental concerns”.
Robert Muldoon became Prime Minister of New Zealand in 1975, during a time when these concerns were at the forefront of national policy discussions. His government recognized that establishing a domestic refinery would mitigate reliance on foreign oil and stabilize fuel prices for consumers and businesses alike. The decision to construct the Marsden Point Oil Refinery was influenced by these economic pressures and the desire for greater self-sufficiency in energy production.
All this was in the context of two major oil shocks: the first as a result of the Yom Kippur War and an OPEC embargo; the second after the 1979 Iranian revolution and subsequent geopolitical tensions in the Middle East
Prior to that much of our oil came from Iran although I have discovered that 30% of our oil came from Middle Eastern sources, but the rest from other sources such as Australia and SE Asia.
That contrasts with now, when we get 100% of our oil from one source, the United Arab Emirates.
The need for energy independence became increasingly apparent as New Zealand grappled with rising fuel costs and supply uncertainties stemming from international conflicts. By investing in domestic refining capacity, Muldoon aimed to shield New Zealand’s economy from future volatility associated with global oil markets.
In the late 1970s, approximately 90% of New Zealand’s crude oil was imported
It is known that the overall loss in worldwide production due to the crisis was around 4% initially, due to Iranian production cuts.
We obviously don’t have figures for New Zealand for this is the conclusion:
Thus, while precise figures for New Zealand are difficult to ascertain without specific data from that time frame regarding import volumes or local production levels lost directly attributable to the second oil shock, it is clear that New Zealand experienced significant disruptions in its oil supply during this period, reflecting broader trends seen across many industrialized nations.
The Marsden Point refinery played a crucial role in refining crude oil into various petroleum products, including gasoline, diesel, and jet fuel, which were essential for both local consumption and export.
Having been completed in 1976, Marsden Point was privatised and deregulated by the Labour government as part of neoliberal reforms in 1984 under the Petroleum Sector Reform Act. This led to the transfer of refinery assets from the government to a consortium known as the New Zealand Refining Company Limited, which included major petrol retailers such as BP, Mobil, and Z Energy.
It is of considerable interest to note that prior to the closing of the refinery it produced approximately 70% of New Zealand’s refined oil needs.
This included a variety of products that catered to the domestic market. In terms of volume, the refinery had an annual capacity of around 3.5 million metric tons of crude oil processing, translating to significant quantities of refined products available for local use.
New Zealand’s total annual oil consumption is about 47.745 million barrels. When comparing the 1.4 million barrels of crude oil previously refined with New Zealand’s total consumption, it represents about 2.93% of their annual usage.
For those who are too young to remember this period of history:
The privatization process was part of a broader trend during that period aimed at reducing government involvement in various sectors of the economy. The government also provided financial support amounting to $80 million to help the newly formed company adapt to this new environment.
Even after privatisation, the Marsden Point refinery processed around 6.5 million tonnes (approximately 46 million barrels) of crude oil each year. and “played a crucial role in meeting New Zealand’s domestic fuel requirements by converting imported crude oil into usable fuels for transportation and industry”.
Somehow, the privately-owned refinery survived the depredations of the Rogernomes and other neoliberal governments until 2022, when it was allowed to be closed down by the Jacinda Adern led Labour government.
Since the closure, New Zealand has transitioned to importing refined petroleum products, while any domestically produced crude oil is exported for processing abroad.
Here are comments from 4 years ago from someone who used to work there.
Marsden Point is not going to be reopened.
In the current political atmosphere both Labour (for ideological reasons, I imagine) and National (to save money) had no difficulty with the decision and actually embraced it.
No one raised a voice against the decision in government, media or even society at large except for a small group of activists.
The only person who had anything to say about this, as he has throughout his political career with the New Zealand First Party, was Winston Peters.
This was, along with the Covid fraud and mandated vaccinations, one of the biggest crimes perpetrated by the Jacinda Adern government.
The pipes at Marsden Point were even filled with concrete to ensure there would be no road back.
“The revelation that the government is allowing the Marsden Point Oil Refinery pipes to be filled with concrete shows an astonishing level of economic ignorance,” says Rt Hon Winston Peters, Leader of New Zealand First.
“At a time when we have massive shortages of supply, a looming economic crisis, and prices of oil and other essential materials going through the roof, Labour is allowing this kind of short-sighted jingoistic behaviour to occur by a foreign company on kiwi soil.”
“The simple fact is New Zealand needs to be open to looking at all options moving into the future that could give us economic flexibility and certainty to achieve a degree of self-sufficiency.”
“This removal of any future use of these pipes at Marsden Point is not a part of the decommissioning process – it is a private company being allowed to commit blatant economic treason,” says Mr Peters.
“The Energy and Resources Minister Megan Woods needs to explain how this can be occurring under her nose at such an important and economically fragile time in our country.”
According to the AI:
The decision to close the Marsden Point Refinery was influenced by several factors, including changing market dynamics, increased competition from cheaper imported refined products, and a shift towards renewable energy sources. Following its closure, the refinery ceased all refining operations, which meant that any crude oil previously processed there would no longer be refined domestically.
NEW ZEALAND’S EMERGENCY OIL RESERVES
I have heard previously that New Zealand’s emergency oil reserves, required under international law since the oil shocks, is actually situated in Singapore.
When I tried to clarify this, this was when the AI obfuscated:
It says:
Petroleum reserves refer to quantities of crude oil and natural gas that are considered recoverable under current economic conditions and with existing technology. These reserves can be classified into different categories such as proven, probable, and possible reserves based on their likelihood of being extracted.
It goes on to say:
When discussing whether New Zealand’s petroleum is held in places like Singapore, it is essential to clarify that while some crude oil may be stored or transacted through international hubs such as Singapore—due to its strategic location and advanced infrastructure—this does not imply that New Zealand’s physical reserves are located there. Instead, what happens is that companies may store excess supplies or engage in trading activities through these hubs.
5. Conclusion on the Claim
In conclusion, while it is true that some petroleum products might be stored or traded through international markets including Singapore, this does not mean that much of New Zealand’s physical petroleum reserves are held outside the country. The majority of proven reserves remain within New Zealand itself; however, logistical operations may involve international locations for trading purposes.
Thus, it is not true that much of NZ’s physical petroleum reserves are held in Singapore and other countries rather than in the country.
Somehow, that does not give me any peace of mind, and neither does this:
It seems to me from all of the above that they are talking about “fuel insecurity” when they are NOT.
They SAY:
Although the likelihood is very low, a significant disruption to our fuel supply would affect all sectors and could cost the economy hundreds of millions to billions of dollars. It could also result in fuel shortages or price hikes. It’s critical the Government has clear oversight of risks and our fuel supply, and there is a contingency supply of fuel reserves onshore.
They go on to say:
Reports on implications of Refining NZ’s conversion and mitigation options
The closure of Marsden Point Oil Refinery was one of the key considerations when the fuel resilience plan 2022 was developed. MBIE looked into the implications of the refinery’s closure, and commissioned the following reports from independent consultants Hale & Twomey in 2020.
Hale and Twomey: Fuel security and fuel stockholding costs and benefits 2020 [PDF 793KB]
Refining NZ: Impact of conversion to fuels terminal [PDF 304KB]
The stark reality is that there is no “fuel security “ in country and they have destroyed what was there before with the closure of the Marsden Point refinery.
GOLD
Another example of the country’s total lack of any strategic thinking is gold. When I looked about ten years ago I found that the country had (at zero) less gold than countries like Mali. Since then, most central banks have been endeavouring to increase their gold reserves.
Nee Zealand has not.
New Zealand’s gold reserves are virtually nonexistent, highlighting a different approach compared to many other nations that actively accumulate gold as a safeguard against economic fluctuations.
In comparison, Australia has 80 tonnes of gold as part of its official reserve assets, an amount that has remained unchanged since 1997.
In recent years, there has been a notable trend among central banks globally, including those in advanced economies like Australia, to increase their gold reserves. According to surveys conducted by the World Gold Council, a significant percentage of central bank officials believe that gold’s share of global reserves will rise over the next few years. Specifically, 57% of respondents from central banks in advanced economies expect an increase in their gold reserves over the next five years.
Furthermore, global central banks added more than 1,000 tonnes of gold to their reserves in both 2022 and 2023. Notably, while Australia’s RBA has not changed its physical holdings since 1997, it is part of a broader context where many countries are actively increasing their gold reserves.
CONCLUSION
The conclusion has to be reached that, amongst all the countries of the world, New Zealand is unprepared for an oil shock to an extent that can scarcely be imagined.
All it will take is for the Iranians to close the Gulf of Hormuz and our supply of oil and petroleum will likely be cut off, given that 100% of our oil comes from the region.
Need I point out that with New Zealand’s geographical position we are at the very end of the supply chain so in cases of shortage are hardly going to be among the first countries to be supplied?
The oil shocks in the 1970’s were serious and the repercussions remained through the 80’s.
They were a result of momentous geopolitical events that were eventually resolved.
30% of our oil in the 1970’s came from Middle Eastern sources. The rest from other sources such as Australia and SE Asia.
That contrasts with now when we get 100% of our oil from one source, the United Arab Emirates.
I would argue that what is happening now - world war in the context of the decline of Western power - is far more serious than what we had back then.
Back then, under Robert Muldoon, we followed our national interests and did not kowtow to the interests of the United States, which was not quite the hegemon it has become in recent years.
To illustrate this, New Zealand, through the conflict with Iran, maintained its trade and continued supplying sheep meat to Iran under the mullahs.
That contrasts with today, when this country is up to its neck in its relationship with the US / NATO right up to being in lockstep, sending millions of dollars to Ukraine and following the Cold War with China when it is clearly not in our national interest and launching rockets for the US military
It has got so bad that Radio New Zealand chose to interview America’s most extreme warhawk, John Bolton, some days ago.
In short, our survival is tied up with the United States as it rapidly declines on the world stage.
If ever there was a symbol of how things have changed, it was that Iranian professor, Mohammad Marandi specifically mentioned New Zealand in his comment the other day:
It is clear to me that this country - government and media - are, to the extent they are even aware of all these considerations, misleading the misinformed public and selling us down the river.
I can scarcely imagine what might be coming down the tubes in just a few weeks time.
Marsden Point Refinery closed due to factors not picked up/discussed by AI.
1. We went through global peak oil in November 2018. Big change has been in the pipe line ever since.
2. The refinery needed another big refurbishment to keep running. It was refurbished about 2-3 decades ago to run on cheap Saudi sour crude. This was from the giant fields now in decline. That oil wore out the refinery 25-30% faster. It was worn out.
3. Under the game change of peak oil, small marginal refineries at the end of their life, become a financial loss not worth continuing.
4. We now don't import crude oil. We import finished fuels and petroleum products. Mostly from Singapore.
5. Almost all our domestic oil was always sent off shore for processing. Our refinery was never set up to do so. Too small amount, not worth doing due to refinery configuration.