What is the Supplementary Fund?

The Supplementary Fund Protocol is the third tier of the International Oil Pollution Compensation (IOPC) funds. The IOPC funds are intergovernmental conventions that provide three levels of compensation for oil pollution damage from spills of oil from tankers carrying oil as cargo.

The Supplementary Fund Protocol establishes a fund that provides up to a total of $1.432 billion of compensation. New Zealand has acceded to the second tier fund that provides up to $385 million of compensation.

How does the Supplementary Fund work?

Levies on oil importers are collected when the cost of an oil spill in a contracting state exceeds the $385 million compensation payable under the 1992 Fund Convention[1], rather than funds being built up from regular annual levies.

The Supplementary Fund Protocol works on a pay-as-you-go basis applying to contracting states that have received more than 150,000 tons of contributing oil in a calendar year.

Since 1996 New Zealand oil importers have contributed between $0.285 million and $0.377 million (2012 dollars) per year to the 1992 Fund Convention.

Why is it important that New Zealand consider acceding to the Supplementary Fund?

Oil tankers in operation in New Zealand generally carry between 55,000 and 100,000 tons. It is likely that it would take an oil spill of 10,000-20,000 tons affecting particularly sensitive areas of New Zealand’s coast for the current $385 million compensation level to be exceeded.

Accession to the Supplementary Fund would provide New Zealand with access to a relatively inexpensive global insurance scheme. The costs are considered appropriate to the level of risk that New Zealand is exposed to from oil transport.

What parts of New Zealand are at risk of an oil tanker spill?

The area most likely to experience a heavy oil spill from an oil tanker is the Whangarei Harbour, where oil tankers carry imported heavy oil to the Marsden Point Oil Refinery. The Northland east coast approach to Marsden Point is also considered high risk, as is the Taranaki coast, due to oil tanker movements to collect oil from offshore installations.

What other risks are there?

A tanker oil spill in New Zealand waters may give rise to environmental and economic effects. These include potential damage to New Zealand’s aquaculture industry and fishing stocks, and decreased demand for New Zealand seafood.

A major oil spill could also potentially impact shipping vessels reaching or leaving ports, resulting in delays, and costs for exporters and importers.

New Zealand’s tourism industry could be affected if our coastline is damaged, or simply by the occurrence of an oil spill itself.

Who would contribute to New Zealand’s payment to the Supplementary Fund?

Contributions would be collected through a levy on the quantity of oil received by ship and would be paid by New Zealand oil importers that receive more than 150,000 tons of oil per year. There are currently four companies importing oil to New Zealand – BP Oil, Chevron NZ, Mobil Oil NZ and Z Energy.

 


[1] Full name: International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992