The move to make the oil refinery an import-only terminal means about 300 of the refinery's 400 on-site employees will lose their jobs. Photo / Supplied
Calls are getting louder for the Government to subsidise Refining NZ operations in order to save hundreds of jobs and retain a strategic asset that is on the verge of slipping away.
Shareholders of the country's only oil refinery, based at Marsden Pt, yesterday
voted overwhelmingly for Refining NZ to become an import-only fuel terminal under the name Channel Infrastructure following a strategic review.
The voting in Auckland preceded a number of questions from shareholders pertaining to the guarantee of oil supply from aboard, arrangements with current Refining NZ customers, environmental concerns, and a lack of information about the proposed model.
In the end, 99 per cent of shareholders voted in favour of the changed model but the final approval will have to come from the Refining NZ board at the end of September.
Falling fuel demand during level 4 lockdown last year drove the company $186.4m into the red in the six months to June 30, 2020.
First Union, which represents 170 workers at Refining NZ, said the move to an import-only terminal would see about 300 of the refinery's 400 on-site employees go and called on the Government to step in before the final investment decision was made.
"The vote by shareholders was not a surprise but the biggest surprise was the Government's hands-off approach, allowing the company to act in the interests of its shareholders and not the country's," union's transport, logistics and manufacturing secretary Jared Abbott said.
"It is still time for the Government to intervene, although I am not confident it will do so. The Government's being woefully naive in this matter," he said.
Energy Minister Megan Woods said she sympathised with the affected workers and that the Government would continue to listen to ideas about how the refinery could be repurposed to produce green fuels.
In the meantime, she said the Ministry for Building Innovation and Employment (MBIE) would continue to assess the implications of a move to a fuel import terminal and how fuel security would be maintained.
"To date, Refining NZ has not requested financial support from the Government to keep refining operations going."
In terms of potential geopolitical risks to fuel supply, Woods said officials have assessed these risks and considered them to be very low.
The minister said MBIE began a review of fuel supply security and stockholding policies in late 2020 and if there were any new fuel security policy proposals, the Government would make an announcement in due course.
Reacting to the shareholders' vote yesterday,
refinery worker and First Union's site delegate Aaron Holroyd said the latest development was disappointing but expected.
"Government influence through subsidy is a possibility to save a strategic asset and save jobs as done in Australia to keep two refineries open but that's not happening here which is very disappointing."
Holroyd said the refinery contributed 8 per cent of Northland's Gross Domestic Product (GDP) and was an important national asset.
E tū union called for a just transition to an import-only facility.
"Marsden Point is facing the same issue as other towns built around manufacturing hubs, and there needs to be a plan to deal with any kind of transition," E tū organiser Annie Tothill said.
Energy Resources Aotearoa chief executive John Carnegie said yesterday's decision by shareholders continued a worrying trend of de-industrialisation and job losses in regional New Zealand.
"We are worried things will only get worse as our appetite for energy grows but economic and reliable renewable alternatives are not yet available.
"We all want to see a smooth transition to lower emissions, while protecting local jobs and keeping energy affordable and reliable," he said.
Ruakākā Ratepayers and Residents Association chairman Jules Flight said the community was resigned to the impending change, subject to the refinery board's approval.
"It's regrettable but it's inevitable. We want to see a commitment towards clean-up of the site and the safe dismantling of the refinery assets that are not used," he said.
Refining NZ chief executive Naomi James said the refinery was open to all options for the Marsden Pt site, and was investigating options such as the import, storage or production of biofuels, including sustainable aviation fuel, and hydrogen.
"We are also looking at the development of the Maranga Ra solar project, potentially in combination with a battery or firming solution, which would also help Channel Infrastructure reduce or completely eliminate its Scope 2 emissions and exposure to electricity costs."
She said the Terminal Services Agreements with Channel Infrastructure customers Z Energy, BP, and Mobil would initially be for 10 years with two right of renewals for a further five years each.
The company, she said, was working to conclude a binding agreement with all three oil companies before the final investment decision is taken by the Refining NZ board.
Company chairman Simon Allen told shareholders yesterday forecasts prepared by independent expert market commentators indicated it could be several years before a rebalancing of regional transport fuel supply and demand would result in a meaningful recovery in gross refining margin.
The challenges to the competitiveness of the refinery were due to its relatively small scale and higher cost of operating in New Zealand, including significant increases in electricity and gas costs and of coastal shipping around the country, he said.
Allen said the expected increasing exposure of the refinery as a significant carbon emitter and its customers all being in favour to an import terminal model pointed to a move in that direction.
"This site has great potential for future repurposing which makes greater use of this strategic site, generates jobs and economic activity for the Northland region and increased returns for our shareholders."
At yesterday's
meeting, shareholder Andrew Harvey-Green of Forsyth Barr questioned why Mobil has not signed an import-only terminal agreement and what gave the refinery the confidence the oil company would do it.
He also asked whether there was any ability for customers to re-price at any point of the agreement or was it set for the full 20 years with both renewals.
James replied prices were set on terms that have been negotiated prior to the signing of the agreement.
Another shareholder, Lindsay Baker was concerned about the security of oil supply. He cited the example of Venezuela which, he said, has vast swathes of oil fields but no refinery which has resulted in higher prices.
James said a number of refineries in Asia could supply refined products to New Zealand, including during global disruptions.
She said Channel Infrastructure's competitive pricing, 170km oil pipeline to Auckland, lower cost environmentally-friendly and safe supplies of refined oil put the company in good stead.
There were no plans at this stage to build a second pipeline to Auckland, she said.
Shareholders were also concerned about the quality of refined oil brought into New Zealand but James said testing in ships and storage could allay those concerns.
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