New Zealand refinery enters crude supply deal

New Zealand Refining Co. Ltd. (NZRC) has entered into a partnership with BP PLC and Z Energy Ltd. to buy crude oil for processing at NZRC’s 107,000-b/d Marsden Point refinery at Northland on the North Island’s east coast.

Under the partnership, NZRC and its two largest customers—BP and Z Energy—have agreed to jointly procure and process crude oil through the refinery to better match crude cargoes to the refinery’s production requirements, according to Z Energy.

The commitment also will ensure greater efficiency and competitiveness at the Marsden Point plant, New Zealand’s only refinery, the company said.

The partnership, which has been more than a year in the making, is a sensible and logical way to improve the efficiency and reduce the costs of New Zealand’s domestic fuel production, according to Mike Bennetts, Z Energy chief executive.

The refinery runs as a tolling refinery with BP, Chevron Corp., ExxonMobil Corp., and Royal Dutch Shell PLC each bringing in their own choice of crude cargo at different times, causing the refinery to run in a less than optimal manner as it processes each different crude cargo, Bennetts explained.

Bennetts added that the new partnership will allow NZRC, BP, and Z Energy to develop a joint-import program that will equip the refinery to operate at more optimal production levels and keep the plant competitive against refined fuel imports.

Improved efficiency at the refinery also will reduce Z Energy’s capital expenditures for infrastructure to help buffer the costs of refined product imports, according to the company, who has been investigating spending up to $50 million (NZ) on building larger import terminals at Mount Maunganui and Lyttelton, NZ.

While approval for these new import terminals remain valid and still are an option for Z Energy, securing reduced refined fuel costs through enhanced operations of the Marsden Point refinery removes the need to commit that $50 million (NZ) of capital, Bennetts said.

NZRC—owned by major shareholders including BP, ExxonMobil, and Chevron as well as about 3,600 private and institutional investors—recently announced it is moving ahead with the $365 million (NZ) Te Mahi Hou (TMH) expansion project, scheduled for commissioning in December 2015 (OGJ Online, Mar. 4, 2014).

Both Z Energy and BP voted in favor of the current TMH upgrade project, Z Energy said.