A Mount Maunganui fuel terminal is to be upgraded in coming months to gain ability to blend biodiesel with mineral fuel, which Z plans to offer to commercial customers about April 2015.

An artist's impression of Z Energy's $21 million domestic biodiesel manufacturing plant to be built in Auckland.

The fuel terminal at the Port of Tauranga will be one of only two terminals receiving supply chain infrastructure to blend mineral fuel with biodiesel, once Z Energy's newly announced $21 million domestic biodiesel manufacturing plant is built in Auckland.

Z's corporate communications manager Jonathan Hill says pipework and engineering is expected to begin at its Mount Maunganui fuel terminal in the next six months, with the company aiming to produce 20 million litres of sustainable biodiesel per year.

Jonathan says beef fat used to produce the biodiesel in Auckland will come from NZ farms through a supply agreement.

'New Zealand produces about 150,000 tonnes of what we call inedible tallow per annum – we'll be using about 10 per cent of that.”

'So we need about 14,000 tonnes of inedible tallow to produce 20 million litres of pure biodiesel.”

Jonathan says Z's Mount Maunganui fuel storage terminal will be upgraded to develop a blending facility 'so we can truck our biodiesel [made in Auckland] into the terminal and then blend it into the diesel that comes out of the terminal [from boats]”.

'So there will be some investment at the Mount terminal around building infrastructure – it certainly reinforces for us the Mount Maunganui terminal is a very important fuel storage and distribution hub.”

Jonathan says fuel from the Mount Maunganui terminal supplies a 'a good chunk” of the upper North Island, from Taupo north, excluding central Auckland which is supplied from its South Auckland Wiri terminal, where the second biodiesel supply chain infrastructure will be installed.

Z's Mount terminal will be ready to blend fuel when the Auckland biodiesel plant is expected to start producing the product 'around this time next year”.

Z chief executive Mike Bennetts says the Z Board has approved the Auckland biodiesel plant project, subject to completion of regulatory and resource consenting – including approvals from competitor companies to construct a blending facility at the Wiri fuel terminal – and finalisation of key contracts.

Fuel from within Terminal New Zealand's storage tanks may be used by Z to blend with its biodiesel, from a plant it intends to build in Auckland, which will produce the product from inedible tallow.

'We appreciate that others have tried and failed to bring domestically produced biodiesel at this sort of scale to the New Zealand market.

'However, we have refined and investigated this particular option rigorously over the last four years, we are not trying to grow a feedstock supply, and with the core of our business in distribution and marketing liquid transport fuels we have confidence in our ability to successfully bring biodiesel to the New Zealand market.”

Mike says the company has had conversations with a number of core commercial customers who have expressed commitments to take volume from Z's initial production.

'We expect strong customer support for a high-quality, genuinely sustainable biodiesel and indeed our decision to proceed is at least partially based on these indications of support.”

Mike says initial production is likely be allocated to commercial customers who would typically use the biodiesel in B5 to B20 – five to 20 per cent biodiesel to mineral diesel – blends in heavy vehicles but the company expected to also supply upper North Island retail sites with a B5 biodiesel blend.