$180m clean-up for NZ Refining

By BRIAN FALLOW

New Zealand Refining is to spend $180 million upgrading the Marsden Pt oil refinery so it can meet Government requirements for cleaner petrol and diesel by 2006.

The upgrade is going ahead only because the firm and the Government's Climate Change Office have been able to conclude the first negotiated greenhouse agreement, which will exempt the refinery from the carbon tax to be introduced in 2007.

The tax, intended to help combat global warming, would have otherwise applied to the energy the refinery itself consumes.

The agreement is a reprieve for the refinery, which employs 260 full-time staff and about 200 contractors.

In the past the firm threatened that without a satisfactory deal to mitigate the impact of the tax on its operations, Marsden Pt was likely to be reduced to an oil terminal and tank farm.

The major oil firms which are the refinery's main shareholders, and customers, would have supplied their New Zealand markets with refined product from refineries overseas, leaving the atmosphere no better, and possibly worse, off.

Yesterday NZ Refining chairman Ian Farrant was more circumspect. Asked if the refinery would have closed in 2005 without the deal he said: "We were not required to take that decision because we reached the agreement. It's enabled us to proceed with the investment and continue refining in New Zealand."

Climate change minister Pete Hodgson denied this was a negotiation which could not have been allowed to fail from the Government's point of view.

"We didn't go into it with a view of getting an agreement at any price."

The extra processing required to reduce the sulphur and benzene in the refinery's output to the Government's new specifications would have required about a 15 per cent increase in its own energy consumption and a corresponding increase in emissions of the gases blamed for global warming. That increase would be roughly halved as a result of the agreement, Hodgson said.

Under the agreement the refinery firm is contractually committed to a path of moving to world's best practice in managing its energy consumption and greenhouse gas emissions. Its progress will be independently monitored.

Farrant said that, because refining margins represented only about 2c a litre at the pump, motorists would not feel the cost of recouping the $180 million investment.

The Marsden Pt refinery supplies about 70 per cent of New Zealand's petrol and 90 per cent of its diesel. It says the foreign exchange saved by not having to import that fuel in refined form is about $175 million a year. It contributes about $24 million a year in tax.