New Zealand Refining Expects Up to $7.8 Million in 2014 Profits

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Researched by Industrial Info Resources Australia (Perth, Australia)--New Zealand Refining Company (NRC) (Ruakaka, New Zealand), which owns the 135,000-barrel-per-day (BBL/d) Marsden Point Refinery, says it expects to record a net profit between NZD$9.5 million ($7.08 million) and $10.5 million ($7.83 million) for 2014.

The expected profit was achieved despite the company recording a NZD$7 million ($5.22 million) loss in the first half of the year, when it was forced to receive top-up payments from shareholders to combat declining profit margins. NRC has cited cheaper crude import prices and a favorable currency exchange rate as the main reasons behind the improvement since the middle of 2014.

In a recent press statement, NRC said its 2014 profit "represents a major improvement over the company's [2014] half year result, and is significantly better than the profit matrix published at the start of the year [2014]."

The weakening of the New Zealand dollar against the U.S. dollar worked in the company's favor by lowering production costs. The decline of crude oil prices, a major import cost for refineries, also helped to lower input costs. The company said it plans to make its full-year announcement February 20.

In November and December, NRC managed to achieve a $9.98 refining margin, which was the highest recorded in five years. The company has been on a drive to improve refining margins to combat declining profits caused by global oversupply and a longer-than-expected maintenance shutdown in March/April 2014. The shutdown led NRC to stockpile residues that are normally used in making diesel and oil, to the point where it ran out of storage and had to export the residue in low-value form. Analysts believe that this resulted in the NRC losing between NZD$10 million ($7.46 million) and NZD$15 million ($11.19 million). NRC's gross refining margin (GRM) dropped as low as $2.72 per barrel in April 2014..

The ability of the NRC to deliver stronger profits in the second half of 2014 has allowed the company to repay the customers and shareholders, who contributed top-up payments earlier in the year. Many analysts are predicting the NRC's GRM to increase as much $1.76 per barrel, once the company's $365 million Marsden Point upgrade project reaches completion in December 2015.

Part of the upgrade, which is being tracked by Industrial Info, includes the construction of a 29,000-BBL/d continuous catalytic reformer (CCR) unit to replace the older Semi-Regen 22,000-BBL/d reformer that was installed in the 1960s. It is expected that the new CCR will enable the refinery to increase the production of gasoline. The new CCR also will supply up to 65% of the domestic demand for mogas in New Zealand--an increase from 55%.

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