Shareholders in New Zealand's 135,000 b/d Marsden Point refinery are to vote on the possible conversion of the facility into an import terminal after the operator reached an agreement with another key customer on the terms of the plan.
Operator Refining NZ said it had reached an in-principle agreement with local fuel marketer Z Energy on key commercial terms, including price, for a potential import terminal operation at Marsden Point.
The deal with Z Energy, the refinery's largest customer, follows a similar agreement reached with BP in February. Refining NZ is still in discussions with its third and final key shareholder and customer, ExxonMobil, about the terms of operating as an import terminal. BP, ExxonMobil and Z Energy own a combined 43pc of Refining NZ.
Refining NZ said it will now prepare for a shareholder vote on the plans, without giving details of the timing.
The refinery conversion would leave New Zealand entirely reliant on oil products imports and mean all domestic crude output would be exported. New Zealand's crude output dropped to a 14-year low of 27,000 b/d last year, down by 10pc from 30,000 b/d in 2019 and the lowest since 23,000 b/d in 2006.
The Marsden Point import terminal would come on line by 2022 with annual capacity of 3bn litres or around 18.9mn bl, Refining NZ said. This is equivalent to about 50,000 b/d, or less than 40pc of Marsden Point's refining capacity. It would supply fuel markets in Auckland and Northland in northernmost tip of New Zealand's North Island, which together account for 40pc of the country's fuel consumption.
"The final investment decision remains subject to shareholder vote and lender approvals, completion of FEED (front-end engineering and design) and detailed planning, consultation with employees and unions, as well as negotiation of binding terminal services agreements with customers," Refining NZ said.
Based on current estimates, a final investment decision in July-September this year would enable the conversion to occur by mid-2022, it added.
The planned conversion of Marsden Point follows several refinery closures in neighbouring Australia. BP's 146,000 b/d Kwinana refinery in Perth closed at the end of March, while ExxonMobil plans to close its 90,000 b/d Altona refinery in Melbourne in the coming months.
The refinery closures in Australia and New Zealand were triggered by a sharp downturn in refining margins last year as the Covid-19 pandemic hit oil products demand. Jet fuel demand, in particular, is still well below its pre-Covid levels.
Refining NZ said yesterday that its gross refining margin had improved in March-April compared with the same two-month period in 2020.
Output at the Marsden Point refinery dropped to a 34-year low of 80,900 b/d last year because of the impact of the Covid-19 pandemic.
