Refining NZ to cut capacity in 2021

New Zealand's sole refinery, the 135,000 b/d Marsden Point, plans to operate at a reduced capacity of 90,000 b/d next year because of weaker oil products demand from the impact of the Covid-19 pandemic.

The reduction will be partly achieved by stopping bitumen production, said Refining NZ. The decision to reduce capacity follows a review of operations, which may still lead to a conversion of Marsden Point to an import terminal.

The operational plan next year includes a deferred 2020 turnaround of the plant's main crude distillation unit and the continuous catalytic reforming platformer.

Total capital expenditure (capex) is expected to be NZ$50mn ($33.2mn) next year. The scaling down of the plant's production will lead to a reduction of NZ$20mn in operating costs, primarily through lower labour and other costs, Refining NZ said. The combined reduction in operating and capex costs are estimated to be NZ$70mn in 2021. Estimated restructuring costs of NZ$5mn this year will be funded using proceeds from asset sales.

Refining NZ disclosed last month that it was in dispute with its largest shareholder ExxonMobil over their processing fee agreement. Refining NZ processes crude into gasoline, diesel, jet fuel and other refined products for a third-party processing fee, which it receives from three wholesalers — BP, ExxonMobil and New Zealand downstream firm Z Energy. Z Energy bought Chevron's New Zealand assets in 2016.

Refining NZ processed 1.77mn bl (29,000 b/d) during July-August compared with 7.42mn bl for the same period a year earlier. It processed 17.2mn bl over January-August compared with 42.69mn bl during the same period in 2019.

Jet fuel produced at Marsden Point during April-June fell to 770,000 bl (8,500 b/d) in April-June, down from 27,000 b/d for the same period a year earlier and 26,000 b/d in January-March. This was the lowest for a quarterly period since 7,200 b/d in January-March 1987. This followed New Zealand's jet fuel consumption dropping to a new long-term low during April-June, as travel restrictions imposed by the government to combat the Covid-19 pandemic suppressed air travel.

By Kevin Morrison