Government decided not to follow through on idea of talks to save refinery

Tuesday, 2 November 2021

Energy Minster Megan Woods raised the idea in a Cabinet paper of talks to underwrite the Marsden Point refinery, but that was not agreed to.

The Cabinet decided not to follow through on the idea of talks to try to save the Marsden Point oil refinery by underwriting the refinery for a period of up to 10 years, it has been confirmed.

Shareholders in Refining NZ agreed a plan to close the refinery by the middle of next year with the expected loss of 240 jobs, at a special meeting called by the company in August.

Energy Minister Megan Woods said in a Cabinet paper released on Tuesday there was “not a strong case to support the refinery’s operations on fuel security grounds”.

But she said she was open to beginning discussions with Refining NZ on a loan or underwriting deal that could ensure the refinery stayed open for perhaps five or 10 years, citing “broader considerations”.

* Energy Minister offers sympathies to refinery workers after closure vote

The Cabinet paper said a loan or similar underwriting facility could support Refining NZ through “the current period of low earnings”, which Woods expected to persist for two to three years, with the reasonable prospect of repayment if or when refining earnings returned to adequate levels.

But it is understood Woods’ idea for those negotiations was not ultimately endorsed by fellow ministers.

Energy Minister Megan Woods made case for intervening in refinery’s closure, Cabinet paper shows, despite downplaying concerns over fuel import model.

Refining NZ has been wrapping up negotiations on the refinery’s closure with oil company shareholders and has been expected to imminently confirm the closure of the refinery and a switch to importing pre-refined fuels.

It said on Monday that its preparations for its conversion to importing pre-refined fuels remained “on track”.

The National Party previously proposed the oil refinery could be kept in a state of standby, so it could be turned back on in the event of a crisis that impacted international fuel supply lines.

Woods’ Cabinet paper said that the closure of the refinery raised a number of questions about fuel supply security and had implications for jobs, the Northland economy, and the Government’s first emissions reduction budget.

The paper said a “no fuel imports” scenario under which New Zealand was cut off from importing pre-refined fuels was “an unlikely scenario, but not entirely implausible”.

Refining NZ had not sought a subsidy or other assistance, but delaying the refinery’s closure by five or 10 years could “avoid potential negative impacts on fuel security and buy time to progress options that would enable skilled workers at the refinery to help kick-start a biofuels industry”, her paper said.

Chris Leitch, leader of the Social Credit Party, which has campaigned to save the refinery, welcomed what he understood to be the Government’s “rethink”, before Woods’ office made clear the idea of talks had not been actioned.

The First Union said last month that, if the Marsden Point refinery did close, the net result would be a net rise in global carbon emissions.

Its analysis suggested that refined oil from South Korea, which it said was New Zealand’s largest source of refined oil during the past two years, resulted in 16 per cent to 38 per cent more emissions that refining at Marsden Point, not taking into account “likely higher transport emissions”.

Emissions from other Asian ‘mega refineries’ could be even higher, it said.

But Refining NZ said last week that its assessment was that the Marsden refinery was more emissions-intensive than the 'super refineries' New Zealand was likely to be supplied with in future.