Z Energy says it may switch to ethanol-blended petrol, but this could cost the Government up to $180 million in lost revenue if other major players follow suit.

The New Zealand-owned fuel retailer says ethanol-blended petrol receives a tax exemption of 60 cents per litre.

Chief executive Mike Bennetts said on Tuesday that if Z was to make a switch to this fuel blend it could save about $60 million per year, which it could then pass on to customers, but this would be at the expense of Crown revenue.

The company is looking at investing $40 million in a new 35 million litre of bulk fuel storage at either Port Lyttelton or Mount Manganui.

Z Energy says the investment would be paid out of its operating cashflow and would mean it could procure larger shipments at lower freight costs.

Z Energy is owned by Infratil and the New Zealand Superannuation Fund.

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