Company closes New Zealand biodiesel facility, plans to import renewable diesel
Mike Bennetts, chief executive of Z Energy, has confirmed the company’s decision to permanently close its biofuels plant, Te Kora Hou, and exit production of biodiesel at the site.
The plant has been in hibernation since May 2020 after rising global tallow prices combined with escalating construction costs to bring the plant to an acceptable scale.
Ahead of the government's Sustainable Biofuels Obligation (previously known as the mandate) coming into effect from April 1, 2023, Z Energy says it has carefully considered the opportunity versus the cost of reopening the plant.
In coming to the closure decision, an initial front-end engineering design (FEED) study, as well as detailed analysis on the economics and risks associated with restarting the plant, was completed.
“One of the key questions we asked ourselves was whether further investment in the plant was the best way for Z Energy to meet the upcoming obligation, and whether it would have resulted in a more cost-effective solution for our customers by producing biofuels domestically than an import alternative such as drop-in renewable diesel,” Bennetts said. “Analysis confirmed that the case to stand up the plant for domestic production is uneconomic when compared to the cost of imported products. In the context of a highly competitive global market, the ongoing challenges associated with securing the necessary tallow feedstock are intensifying.”
According to Bennetts, tallow prices have increased approximately 400 percent since 2015, from $450 (USD$281) per metric ton then to $2,077 (USD$1,288) per ton in March 2022.
“While we understand that there will be disappointment in this decision being confirmed, Z Energy’s commitment to investing in biofuels, including leading the introduction of biofuels into the market to help the New Zealand transport sector decarbonize, remains strong,” he said. “At this point in time, Z Energy believes importing renewable diesel from the international market will be the most efficient and climate-friendly way to meet the obligation’s emissions intensity reduction targets for the first two to three years of the obligation and make biofuel products available to the New Zealand market. We look forward to continuing to engage with the government over the coming months as the obligation bill makes its way through Parliament.”
Z Energy is a subsidiary of Ampol Group and owns and manages approximately 200 service stations, 160 truck stops, pipelines, terminals and bulk storage terminal infrastructure throughout New Zealand.