Small investors entered the Refining NZ shareholders meeting, resigned to ending Marsden Point’s business as they’ve known it for 60 years
The decision to shut down New Zealand’s only oil refinery was just “pandering to the Greens”, said one shareholder; it jeopardised the supply of diesel for farmers and truckies, said another; it exposed the country to the caprice of China; it made the economy as vulnerable as Venezuela … the concerns continued.
Refining NZ’s directors and management faced resistance from the floor of their special general meeting, but in the end the vote on downgrading Marsden Point refinery to a small import terminal was a foregone conclusion.
Chair Simon Allen rejected accusations the decision was political. The refinery’s revenues had been declining and would continue to do so, he warned, unless they agreed to transition to an import terminal.
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And with the backing of institutional investors the result of the vote, when it came, was near unanimous. The company plans to shut down its refinery, lay off 240 of its remaining 300 staff near Whangārei, and change its name from Refining NZ to Channel Infrastructure to reflect the fundamental change to its business.
The three big fuel companies that together own 42 percent of the refining business had already stated their support for downgrading it to an import terminal. As such, it would compete with the port at Mt Maunganui – but its main market would shrink to Auckland and Northland.
Chief executive Naomi James said the approval meant Refining NZ would proceed to a final investment decision by the Board, with a target for transition by mid-2022. It also meant ramping up work to manage this transition safely and smoothly for the current workforce, wider community, and customers.
“This is a major milestone for Refining NZ and takes us a step closer to our new business,” she said, “Channel Infrastructure has a vision to be New Zealand’s leading independent fuel infrastructure company that utilises Marsden Point’s highly strategic assets for the benefit of our community, and all New Zealanders.”
“We can reflect on the New Zealand Refining Company’s 60 years of refining oil for New Zealand with pride,” she added. “But this change will give our company a long-term future, and while this change will have little impact for most New Zealanders, it is a major milestone for our workforce and wider community.
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Earlier, she told shareholders the new import terminal would have capacity to meet Auckland’s fuel demands, and its pipeline remained the only channel serving jet fuel to Auckland Airport.
By converting to an import terminal, James said the company would help New Zealand meet its decarbonisation targets and 2030 commitments. She said Marsden Point’s scope 1 and 2 emissions would be reduced by 98 percent – equivalent to almost 1 million tonnes of carbon dioxide a year.
In addition, the company would significantly reduce its electricity use, and would no longer need to use any gas – reducing the company’s exposure to electricity and gas costs and demand on these constrained markets.
James said the company was open to all options for the future of the site – though she did draw the line at one shareholder’s proposal to build a nuclear power plant there.
Charlie Hong, who also invests in South Korea’s government-owned nuclear power plants, said Marsden Point was well-placed for developing nuclear power, near a skilled workforce. “It’s time to change our thinking,” he told Newsroom. “We shouldn’t see it as risky anymore.”
Investor Coralie van Camp exhorted other shareholders to vote against the import terminal conversion, saying it was politically motivated to pander to the Green Party, but the country still needed a secure supply of domestically-refined jet fuel and diesel.
Clive Miln, an agricultural contractor from Waiuku, said his family has been shareholders since the refinery opened in 1963. He supported the conversion in principle. But speaking on behalf of farmers, agricultural contractors, truckies and heavy machinery operators, he was worried about supply of diesel if it wasn’t refined locally.
But in the end, the small shareholders’ arguments were in vain; the vote passed with 99 percent support.
The company still faces two more challenges to lock in its decision: it must gain its lenders’ agreement to fund the $220m conversion, and it must sign supply agreements with the three big fuel companies. Z Energy and BP have initialled in-principle agreements, but Mobil has not – and this week, its country manager Andrew McNaught cast doubt on hopes of repurposing Marsden Point to produce biofuels.
Naomi James sought to reassure shareholders about progress on those agreements: “We are working to conclude a binding agreement with all three customers, including Mobil, before a final investment decision is taken around the end of Q3.
“We know that. Transition from refinery to import terminal is a question of when, not if.”
Economists questioned whether there was any real cut to emissions, or if the emissions were just being shifted from the books of a NZ refinery to an Asian refinery. The refinery didn’t produce the emissions, the users of its product did, tweeted NZ Initiative economist Matt Burgess. “Those users will now get their product from a different refinery.”
At the refinery near Whangārei, affected workers were able to watch the shareholder vote on their future, live-streamed into the plant’s auditorium.
Media and analysts have reported doubts about New Zealand’s fuel security in an environmental, commercial or geopolitical crisis, without Marsden Point’s big stockholdings. And Newsroom reported the refining company’s tacit endorsement of Australian-style government-mandated fuel security measures, including a domestic stockholding obligation.
The Australian Government has announced subsidies of up to 1.8 cents a litre to keep some of its refineries open, amid concern that its economy could be threatened it if were forced to rely on Chinese refineries. Refining NZ disputes that its statement to shareholders constitutes any endorsement.
On the eve of the shareholder vote, Mobil country manager Andrew McNaught cast doubt on whether producing biofuels in New Zealand could be commercially viable, because it would be increasingly difficult to buy affordable, suitable, and reliable feedstocks (like meat tallow or forestry waste) with which to make the new green fuels.
Until now, the three fuel companies had presented a united public front. Z Energy chief executive Mike Bennetts has been an outspoken proponent of biofuels, and that had underpinned Refining NZ’s position that Marsden Point could be repurposed as a fuels and energy hub, with the potential to support future production, storage, handling, import and export of energy sources including biofuels, sustainable aviation fuel and hydrogen.
The shareholder vote isn’t the last word on the decision to shut down the refining operations and repurpose Marsden Point. The final decision is to be made by the Refining NZ board based on a report at the end of the third quarter.
If the board signs off the decision in September, the business will change its name and shut down its refining operation around the middle of 2022.
Energy Minister Megan Woods paid an unreported visit to Marsden Point on June 17, and met management and union representatives. And both central and local government are represented on Refining NZ’s transition group, considering the impact on fuel supply, jobs and the economy as the company plans its big change.
Ahead of the shareholders vote, Woods said they had been closely monitoring Refinery NZ developments. “To date, Refinery NZ has not requested financial support from the Government to keep refining operations going,” she said. “In terms of potential geopolitical risks to fuel supply (bearing in mind all fuel refined at Marsden Point is already imported), officials have assessed these risks and consider them to be very low.”
The Ministry of Building, Innovation and Employment is reviewing fuel security and stockholding policies and is expected to report back to the minister in coming weeks; she could ask Refining NZ to increase its stockholdings.
“The closure of Refining NZ’s refining operations would mark a significant change in New Zealand’s fuel supply chain,” a ministry spokesperson said. “In particular, Refining NZ would no longer hold stocks of crude oil, which could mean a drop in the overall commercial stockholding of fuels and crude oil in New Zealand.”