Z hopes to reach agreement on closure of Marsden Point refinery by end of month

Thursday, 6 May 2021

Marsden Point oil refinery currently refines most of the fuel used in New Zealand.

Z Energy says it expects to complete negotiations on the future of the Marsden Point oil refinery by the end of the month.

Refining NZ is currently reviewing its business with oil company shareholders including Z seeking to persuade the company to shut its refinery and instead switch to importing pre-refined fuels.

The First Union forecast last year that hundreds of jobs at Refining NZ would go and as many as 3500 jobs could be impacted in ancillary industries around the country if the change goes ahead.

There is speculation that higher gas and electricity prices have further weakened the economics of the refinery.

Z’s fuel sales dropped 29 per cent, in part due to lower jet fuel demand, in a year defined by Covid.

* Plan to quit refining at Marsden Point could happen next year

* Z Energy to withhold payments to Refining NZ amid dispute

* Refinery closure would cost 1000 Northland jobs and push up fuel prices, says union

* Ending refining at Marsden Point could impact 3500 jobs, says union

Refining NZ declined to comment on the impact that was having earlier this week.

Z when releasing its annual results on Thursday said the refinery was losing “cost competitiveness” at a time when larger, more efficient refineries in the Asia Pacific region were about to come on line.

“Negotiations with Refining NZ remain ongoing with good progress being made. Z expects negotiations to conclude by the end of May,” it said.

A Refining NZ spokeswoman said a final decision to convert to an import terminal had not been made and any decision to do that “would ultimately be subject to approval of Refining NZ’s non-customer shareholders'.

“All of our customers have indicated a preference to move to an import terminal and we have been working with them, in good faith, to see if we can reach agreement on terms which are both acceptable to them and fair to our shareholders.”

Refining NZ had reached an in principle agreement with BP on key commercial terms which was non-binding and subject to conditions, she said.

The negotiation of commercial terms had to be “acceptable to customers and fair to Refining NZ shareholders”, she said.

Z Energy returned to profit despite a huge slide in the amount of fuel it sold during the year to the end of March.

The company’s results showed Covid having a massive impact on its business, with fuel sales volumes down 22 per cent to just under 3.1 billion litres and revenues down 29 per cent to $3.5b.

Most of the sales drop was due to a decline in sales of jet fuel, bitumen and marine fuels, it said.

However, the company made a $57m profit, turning around an $88m loss in the previous year thanks in part to it achieving its goal of securing $48m in cost savings.

Z declared a final dividend of 14 cents per share, which will be payable on June 2 – earlier than expected – after better earnings in the second half of the year allowed it to renegotiate a loan condition with its banks.

Chief executive Mike Bennetts said the year had presented “unprecedented challenges”.

“Covid-19 defined the year,” he said.

“Our operational focus centred on keeping our staff and customers safe and exploring ways we could more effectively operate under Covid-19 restrictions while supporting the mental wellbeing of our people.”