Z Energy has confirmed its plans to close the Te Kora Hou biofuels plant in south Auckland due to uneconomic production costs compared to the global biofuels market.
The plant has been in hibernation since May 2020 thanks to rising global tallow prices and the escalating construction costs needed 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 1 April 2023, Z have 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 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,” says Mike Bennetts, Chief Executive.
“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. As an example, tallow prices have increased some 400 per cent from around $450 per tonne in 2015, to $2077 per tonne in March 2022.
“While we understand that there will be disappointment in this decision being confirmed, Z’s commitment to investing in biofuels, including leading the introduction of biofuels into the market to help the New Zealand transport sector decarbonise remains strong,” says Bennetts.
Z 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 2-3 years.