Refining NZ is set to proceed as a fuel import-only terminal following the board’s final investment decision and marking a significant turning point after 60 years as the country’s only oil refinery.
Further to the shareholder mandate received in August, the company will now be changing its name to Channel Infrastructure NZ Limited (NZX:CHI) with fuel import operations beginning in April next year.
It has entered into long-term agreements with its three existing customers BP, Mobil and Z Energy for the provision of import terminal services.
Fuel will be stored at the Marsden Point site in existing tanks at what will be the largest fuel terminal in New Zealand, with 180 million litres of shared capacity, plus dedicated private storage and capacity to provide additional storage.
Channel Infrastructure will continue to provide fuel testing services both at the Marsden Point site and around New Zealand, through its subsidiary, Independent Petroleum Laboratory Limited (IPL).
Fuel from Marsden Point will be distributed on behalf of Channel Infrastructure’s customers primarily to the Auckland and Northland markets, which make up around 40% of New Zealand’s fuel demand, through the 170 kilometre refinery to Auckland pipeline (the RAP) and the truck loading facility (the TLF) located adjacent to the Marsden Point site.
Refining NZ has been the country’s only oil refinery since it was established in 1961.
The board says it made the transition in response to a significant decline in refining margins because of excess refining capacity in the Asian region.
Refining NZ initiated a strategic review of the business in April 2020, to determine the optimal future business model and capital structure for the company’s future.
The review included engagement with a range of stakeholders including customers and government regarding potential options for ongoing refinery operations and the potential conversion to import terminal operations, it says.
Chief executive Naomi James says the final investment decision marks a “momentous day” for the company after 60-years of operations as New Zealand’s only oil refinery.
The business will “continue to contribute to our community, and New Zealand, long into the future’, she says.
Company chair Simon Allen says the board is “pleased to reach this key milestone”.
“I want to thank all of those who have been involved with reaching this point and delivering a clear path forward for our company.”
The company says it has made long-term agreements with customers to provide dedicated private fuel storage with further agreements expected.
It says there is growth opportunity for the service and is making an initial capital commitment of around $30 million towards it and is expecting incremental revenue of around $50 million on a fixed rental basis over a 10-year term.
Job losses, concerns raised
The closure will see 240 jobs losses out of 310 jobs at the refinery with some workers kept on for up to two years, the company says. The decision will also impact more than 3000 workers who indirectly provide work for the company which contributes about 8% of Northland’s GDP.
The company produces around 70% of the petrol, diesel and jet fuel used in New Zealand and is 43% owned by Z Energy, BP and Mobil, and charges those customers processing fees based on refining margins in Singapore.
All product that is imported to the terminal will be owned by its customers and is expected to be sourced from a range of refineries in the Asian region.
A number of groups have strongly opposed the closure including the Maritime Union which says it poses a threat to New Zealand’s energy security.
National secretary Craig Harrison says security and resilience are now the two most important factors for New Zealand’s economy.
“Exposing New Zealand further to a highly volatile international situation is reckless,” he says.
Energy Resources Aotearoa chief executive John Carnegie is also concerned about the closure and says it represents a “worrying trend of de-industrialisation and job losses in the regions”.
“Recent examples include the closure of the Norkse Skog papermill in Kawerau, Methanex mothballing their Waitara Valley plant and New Zealand Steel reducing production.
“While there are many domestic and global factors at play, the high cost of energy has been an element in all of these decisions.
“We are worried things will only get worse as our appetite for energy grows but economic and reliable renewable alternatives are not yet available,” Carnegie says.
Meanwhile, Bioenergy Association executive officer Brian Cox says the refinery should be kept open for and repurposed for the production of renewable biofuels.
Stuff has reported that energy minister Megan Woods was considering options to save the refinery but did not get the support from fellow minister to follow through.
A petition calling on the Government to take action and keep the Marsden Point Oil Refinery operating has had nearly 18,000 signatures.
