Reacting to Mobil`s action, Refining NZ said this week that it has been discussing with customers for a few months its simplification plans that would allow the refinery to “continue to work in the currently challenging environment, with low refining margins and refining throughput significantly impacted by COVID-19.” For more information: Ellie Martel Government and External Affairs Manager Ellie.Martel@refiningnz.com +64 (0) 20 4174 7226 The refinery said it was “confident” that its simplification plan would meet the terms of the treatment agreement and said it would continue to act in accordance with the agreement during a dispute settlement procedure. Mobil Oil New Zealand has issued, as part of its processing agreement with Refining NZ, a statement of dispute regarding the refining company`s plans to “simplify” its oil refining operations at Marsden Point. The company also pointed out that, in accordance with the terms of the processing agreement, “customers take the risk of periods of low margins and demand through the Fee Floor structure, which offers a fixed turnover to Refining NZ, regardless of the actual throughput”. It also noted that its independent directors, who have overseen discussions with customers, “continue to see significant unrealized value in Refining NZ`s infrastructure.” The director of government and external relations Ellie.Martel@refiningnz.com Refining NZ said he had drawn up plans to enable it to “continue to operate the refinery at the lowest possible cost in 2021 and operate in a cash-neutral manner, maintain a reliable supply of fuel for the New Zealand market while meeting its obligations under the processing agreement”. As previously announced, Refining NZ operated the refinery in cyclical mode in May and June in order to achieve much lower performance. The company continued its strategies to minimize kerosene production while meeting gasoline and diesel requirements, and refinery throughput was limited by the destruction of kerosene demand. Refining throughput amounted to 3.9 million barrels in May/June, about 55 percent compared to the same period a year earlier, before process units prepared from early July to mid-August to offset fuel supply across the country. Refining NZ Updates on Refinery Simplification Plan First of all, the large demand for floating stocks has led to an increase in both the cost of delivering VLCC crude oil to Singapore and the shipping costs for finished products to New Zealand. Second, Abu Dhabi crudes, processed at the refinery, were heavily discounted compared to Dubai crude oil. Refining NZ completed Phase 1 of its strategic review and updated the market on June 25. The company is currently developing plans to simplify refining activity and structurally reduce operating costs. At the same time, the company will continue to consider a possible future transition to an import terminal.
Refining NZ expects to provide a further update to the strategic review process towards the end of the third quarter. Refining NZ said it believed its simplification plans would lead the refinery back to an overall level of capacity similar to that which existed at the time the royalty limit was set at the start of the transformation agreement. Here is an excerpt of the original content. To read it further, go to the original document here.