Refining NZ Aims to Reform Marsden Point Refinery, an Industrial Info Market Brief

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In recent discussions, Refining NZ has disclosed a two-pronged strategy aimed at cutting costs to maintain viability and economic survival of its 58-year old Marsden Point Refinery in New Zealand amid a sea of strong competition coming from mega refineries in Asia and rising power and gas costs in New Zealand. The approach will also take into consideration the devastating effects of the COVID-19 pandemic, which has hammered fuel demand.

1. In the short term, the company said it would cut costs and operations to focus on markets where it is most competitive relative to imports, mainly around Auckland. The goal is to at least "break even" going into 2021.

2. In the long term, the company is working on plans to convert the plant, which produces about 70% of the country's fuel needs, into a fuel import terminal. A more definitive decision is forthcoming sometime in September this year.

Up until now, since the pandemic began, Marsden Point has been fully supported by its three customers - Z Energy and the New Zealand units of Exxon Mobil Corporation and BP Plc, which pay a "fee floor" when margins drop below the plant's fixed operating costs. However, the company will still need to discuss fuel security with the government, insofar as the risks of importing refined products rather than crude for the refinery is concerned.

IIR is closely monitoring the Marsden Point Refinery, as well as other refineries in the Oceania region. See map below.