Shareholders of Refining NZ, which owns New Zealand’s only refinery, Marsden Point, have voted through plans to convert the 135,000 bpd refinery into a fuel import terminal.
The plans were first put forward in August 2020 following a strategic review and put to the vote on 6 August 2021. Refining NZ’s independent directors had already unanimously agreed that switching to a terminal was the right decision.
The new terminal will operate under the name of Channel Infrastructure and will be the largest fuel terminal in New Zealand. Channel Infrastructure will import refined fuel via the existing deepwater harbour and jetty infrastructure at Marsden Point, and will be stored in the refinery’s existing tanks. The company plans to distribute fuel to the Auckland and Northland markets via the existing 170 km pipeline and neighbouring truck loading facility. Refining NZ chairman Simon Allen told shareholders in an online meeting that the new business model would allow the company to make the most of the strategic Marsden Point site and generate jobs and increased returns.
The plans are still conditional on agreements made with customers and lenders, and a final investment decision by the Refining NZ board, which will be based on front end engineering and design (FEED) work by management. The board expects to make a FID by the end of Q3 2021, with the refinery’s conversion expected by mid-2022.
‘This is a major milestone for Refining NZ and takes us a step closer to our new business. Channel Infrastructure has a vision to be New Zealand’s leading independent fuel infrastructure company, that utilises Marsden Point’s highly strategic assets for the benefit of our community, and all New Zealanders,’ says CEO, Naomi James
Allen told shareholders that the strategic review was undertaken due to a ‘significant’ fall in gross refining margins, exacerbated by the COVID-19 pandemic. Independent forecasts have shown margins were unlikely to recover for several years, while rising electricity, gas and shipping costs were affecting the competitiveness of the refinery. The company also considered that the refinery is a net carbon emitter, at a time when New Zealand is seeking to decarbonise its economy, while its three main customers were in favour of the switch to an import terminal. Since January 2021, the refinery operations have been simplified as Refining NZ sought to consider the change while maintaining shareholder value.
Marsden Point is the latest in an ever-increasing list of refineries to be converted into terminals due to falling margins, including Engen’s Durban refinery in South Africa, ExxonMobil’s Altona refinery in Australia and BP’s Kwinana refinery, also in Australia.