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NZ Refining suffers $8 million hydrocracker problem

Thursday 24th March 2016

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New Zealand Refining will shave between $7-and-$8 million off processing fee revenue due to problems at its hydrocracker unit.

"We have experienced operational issues with the hydrocracker unit resulting in the identification of a modest amount of emergent repair," NZ Refining said in a statement. "The repairs will be undertaken concurrently with the upcoming shutdown."

Earlier this month, NZ Refining said a planned shutdown of the hydrocracker and related units to replace some of the catalyst and to perform maintenance work would take place in April.

"The impact has been factored into the profit matrix for 2016, presented with our analyst briefing," the company said at the time. "Refining NZ’s margin during the March/April period will be negatively impacted as a result of the hydrocracker being off-line, since this limits the company’s ability to upgrade lower cost feedstock into high value products."

A hydrocracker uses hydrogen to break down heavy oil fractions, recovered from crude oil, to produce petrol, kerosene - used as jet fuel - and diesel. NZ Refining is New Zealand's only oil refinery, and describes its hydrocracker as "the heart of the refinery."

Last month, the oil refinery produced a net profit of $151 million for the year ended Dec. 31, compared with $10 million in 2014, which was driven in part by a near doubling in the average gross refining margin at US$9.20 a barrel, prior to cap or floor adjustment, compared with US$4.96 per barrel the previous year.

The result was achieved on total revenue of $445.2 million, compared with $230.6 million the previous year, including a record $379 million of processing fees on the largest ever throughput of crude oil at 42.6 million barrels. 

The company's shares recently traded at $3.07, up 0.7 percent today, and have fallen 19.2 percent so far this year. 


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