N.Z. buys oil on long term contracts

Press, 4 September 1982, Page 3

N.Z. buys oil on long term contracts

Parliamentary reporter

The Government prefers to buy oil on a term contract basis rather than on the spot market, even though spot market prices can drop below official'prices according to the Ministry of Energy. While the spot market was an indicator of market forces, it could be manipulated and only a very small proportion of internationally available oil was traded on a spot basis, the Ministry’s annual report said.

The short-term differences between official contract prices and spot market prices tended to balance out over a longer period, and because of this, the Government preferred to obtain petroleum on a long-term contract basis. However, it had taken steps to engage in Govern-ment-to-Government dealing when supply was threatened.

Oil imports fell from four million tonnes in 1980, to 3.44 million tonnes in 1981. But the oil bill rose from $1271 million to $l3Ol million largely, because of appreciation in the United States dollar, particularly against the New Zealand dollar.

The main sources of crude oil were Saudi Arabia (50 per cent), Indonesia. (33 per cent), Qatar (13 per cent), and Kuwait (4 per cent). Refined products were imported from Australia (50 per cent), Singapore (36 per cent) and Bahrain (14 per cent). Over-all consumption of petroleum products declined by 5.5 per cent in 1981 from the previous year. This was largely due to a 25.8 per cent reduction in fuel oil use, with gas taking over from industrial fuel oil and smaller

decreases in the use of diesel, kerosene. Avgas and Avtur.

The report said the overall decline in sales was moderated slightly by a 1.6 per cent increase in motor gasoline consumption caused partly by the lifting of earless days restraints.

The Ministry of Energy has a six-month stock of petrol rationing coupons. Planning of a stand-by petrol

rationing scheme had reached the stage of draft manuals being prepared the report said. A revised earless days system could also be introduced within a month if required. On liqufied petroleum gas distribution, the report said that the long-delayed introduction of four railways tank cars this year would free some equipment. for South Island deliveries.

Liquigas intended to have its 1000 tonne bulk tanker and first South Island depot working in Dunedin by late next year. Until bulk shipments began, a temporary 15c a litre subsidy would continue. It would be replaced by a further subsidy scheme on South Island sales after then, to September, 1988. Last year’s hydro-electric-ity. inflows were slightly above the mean. In the North Island, 96 per cent of generation potential from the inflows was used; in the South Island, 86 per cent. The year began with use of gas-fired generation at New Plymouth to conserve hydro storage in the North Island. When those lakes rose in June 1981. thermal power was used only to meet peak demand.

South Island storage remained high and there was

maximum electricity transfer to the North Island.' After January widespread spilling from South Island lakes was necessary because all storage reservoirs were full.

The Government had approved $162 million since 1977 for construction of 13 local hydro schemes, the report said.