Reviving Marsden Point oil refinery would likely cost ‘billions’, says owner

Tuesday, 28 November 2023

The owner of the decommissioned Marsden Point oil refinery has scotched the suggestion it could be reopened, saying it believed that would cost “billions of dollars”.

The coalition agreement between the National Party and NZ First commits the Government to investigating the reopening of the refinery, as well as to commissioning a study into the country’s fuel security and establishing “a fuel security plan”.

The latter would be designed to ensure key transport services, including emergency services, could continue operating in the event of disruption to fuel imports or domestic distribution.

Channel Infrastructure, the NZX-listed firm that once operated the refinery, indicated that getting it back online was a non-starter, as it had been fully decommissioned.

“There is no part of the former refinery that can be restarted,” a spokesperson said.

“While we haven’t undertaken formal costings, we would expect the cost to recommence refinery operations would be in the order of billions of dollars and take a number of years.”

Channel Infrastructure, then called Refining NZ, closed the refinery with the loss of 240 jobs in April last year.

That was in keeping with the wishes of its fuel-company shareholders, which argued it would be more cost-effective for them to switch to importing pre-refined fuels, such as petrol and diesel.

Critics of the closure expressed concern it could reduce New Zealand’s fuel security, but that risk was played down by the former government, which argued the country was already reliant on crude oil imports.

A Cabinet paper revealed that former energy minister Megan Woods had floated the idea of saving the refinery by underwriting its operations for a period of up to 10 years but that the option did not get the support of her fellow ministers.

The First Union campaigned to prevent the refinery’s closure, but its national oil and gas coordinator, Justin Wallace, agreed reviving it was not now realistic.

Although the “footprint” of the refinery was still there, Channel Infrastructure had dismantled its key components as soon as they were able and between 80% and 90% of the staff who had worked at the refinery had left the company, he said.

“They've gone overseas, taken redundancy, or retired. Unless the Government is willing to tax more people to find more money to rebuild it, I think it's a pipe dream.”

The former government passed a law shortly before the election that requires major fuel companies maintain minimum stocks in New Zealand equivalent to 28 days’ demand for petrol, 24 days’ demand for jet fuel, and 21 days demand for diesel.

But Wallace said a fuel security plan was still needed as the storage might not address all the issues that could be thrown by a shipping crisis.

“If something was to happen in southeast China, that could have a serious ramifications for our fuel supplies,” he said.