Thursday 23rd August 2018
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The New Zealand Refining Company intends to appeal aspects of the consents it has been granted for dredging the mouth of the Whangarei harbour.
Chief executive Sjoerd Post said the company believes a couple of the 138 conditions are unreasonably onerous and won’t deliver any environmental benefit.
The consents have imposed a blanket turbidity standard across the whole project, when most of the work is outside the harbour. Independent commissioners have also said dredging should not take place between October and January in order to allow seafloor species to recover.
Post said the turbidity standard makes sense in the inner harbour and near marine reserves but adds nothing outside the harbour where most of the work will be carried out.
The closed period also seems unreasonable, given the firm’s advice that the time of year makes no difference to recovery of marine life, but could be quite restrictive in terms of the firm’s ability to contract a specialist vessel and operator for the work.
“We are keen to get this right,” Post told BusinessDesk. “We are very keen to do this without stressing the environment, but on these couple of conditions we think we have been asked a little too much.”
The plant at Marsden Point is the country’s only oil refinery and produces about 70 percent of the petrol, diesel and jet fuel used here. It is 43 percent-owned by Z Energy, BP and Mobil, and charges those customers processing fees based on refining margins in Singapore.
The planned dredging – possible any time after 2019 – would deepen and straighten the existing shipping channel. It would reduce refining costs and risk by enabling crude deliveries on fewer, but larger, tankers and help keep the operation competitive against newer, larger refineries in Asia.
The company, which trades as Refining NZ, earlier reported a $2.8 million loss for the six months through June 30 after an extended shut of the site’s hydrocracker reduced yields and increased the cost of the firm’s biggest shutdown in 15 years.
Revenue for the period fell to $147.1 million, down 23 percent from the same period a year earlier when the company posted a net profit of $35.2 million. Throughput fell to 17.9 million barrels during the six-month period, 11 percent less than a year earlier.
The company estimates the shut reduced net profit by $43.2 million – compared with the $30 million originally planned. Total capex for the programme was $98 million and the total cost was estimated at $110 million – up from the $85 million originally estimated, but at the bottom end of a range the firm indicated in late June.
While the over-spend was “regrettable” Post said the site was now performing well. More than 1,700 individual projects had been completed in complex and difficult conditions.
The seven weeks of work included major rebuilds of the refinery’s high vacuum unit and its hydrogen manufacturing plant, and involved 600,000 work-hours. The plant’s usual annual work rate is 1.2 million hours, he noted.
Post said work that was more difficult than expected, or only discovered when equipment was opened up, added about 13 days to the work programme and about $22 million of capex.
The failure of a brand new valve late in the programme had also added about another eight days of work.
Chief financial officer Denise Jensen said the firm had done well to deliver an average gross refining margin in the first-half of US$5.65 a barrel. Without the shut it would have delivered a gross margin of about US$8.25, compared with US$7.70 a year earlier, including an increased uplift over Singapore rates.
She noted that margins since July have been tracking at about US$8 a barrel. The New Zealand dollar is also trading at about 67 US cents, compared to 73 cents for the half-year just reported.
With no shutdowns planned this year or in 2019, and the potential for a record 44 million barrel throughput next year, the board agreed to pay a 3 cent-a-share first-half dividend on Sept. 20. Last year the first-half payout was 6 cents.
The firm’s shares rose 5 cents to $2.51 on the NZX. They have fallen about 5 percent so far this year.
Refining NZ has had a raft of upgrade projects underway since completing the installation of the $365 million continuous catalytic regeneration unit in late 2015.
It has completed a project to allow customers to bring additional jet fuel supplies into the country during peak travel periods, but is reviewing whether a tank conversion planned as the next phase of that work at Marsden Point is still required.
Next year it will also complete work increasing the capacity of its fuel pipeline to Auckland, and producing sulphur in solid form for fertiliser maker Ballance Agri-Nutrients.
Post said the upgrade of the site’s hydrogen unit strengthens the firm’s position as a major producer. Hydrogen is likely to play an increasing role in low-carbon transport through things like biofuels, long-distance trucking and aviation, and the company can already make more than it needs.
Post said the company has also looked conceptually at whether it could use solar at Marsden Point to also make electricity and hydrogen and help reduce the carbon footprint of its operations.
He said the company has a future in the transition to a low-carbon economy and beyond, and its options around hydrogen and biofuels are part of that.
“We have the technology to at least kick-start that as a possible future.”
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