New Zealand’s only oil refinery, Refining NZ, is considering shutting their refinery and turning it into a fuel import terminal in the future, as now they’re cutting its production to reduce costs and reach a break even in the year of 2021. The refinery located in Marsden Point has not progressed as much as expected, due to competition from Asia’s mega refineries and the rising cost in gas and power in New Zealand. The condition is worsened by the ongoing global pandemic of COVID-19 that pummels ships and planes fuel demands.
The company said in a strategic review update on the plant’s future that it would cut costs and focus on most competitive markets relative to imports, mainly around Auckland. Refining NZ has been sustained over the past six months by its three customers; the New Zealand units of Exxon Mobil Corp and BP Plc and Z Energy, as all of them pay “fee floor” when margins drop below the plant’s fixed operating costs. In a full year that would amount to NZ$140 million ($90 million).
The spokesperson said that the company has been protected from how low their refining margins have gone, and the simplification means operating within that level of revenue.
Refinery NZ's gross margin slid down to just $0.67/barrel in March-April from a historical average around $5. The company which produces around 70% of the country's fuel needs, is working on plans to convert the plant in the long term into a fuel import terminal. But the terms of fuel security will be discussed further with the government. Refinery NZ spokesperson said that importing refined products rather than crude oil will have a manageable risk.
BP NZ and Z Energy are supporting the direction taken by Refining NZ. They believe the moving to an import terminal model is the best outcome for the refinery and NZ, and Mobil NZ said they will continue working with NZ in the next steps.
