Refining NZ is slashing processing rates at Marsden Point to match a sharp drop in fuel demand as the country goes into lockdown from midnight tonight.
The plant, which produces about 75 per cent of the country's petrol, diesel and jet fuel, is halting all non-critical work and will seeits daily workforce drop from 600 to about 200 tomorrow. Workers remaining on site will be a mix of staff and contractors focused on operations, emergency services and core maintenance.
The company, 43 per cent-owned by the major oil companies, is working with those customers to determine a revised schedule of crude oil deliveries, allowing for tankers already on the water.
Upgrade work underway on the site's hydrocracker will continue and should be completed in about two weeks. But another work programme scheduled for April and May, including the first inspection and catalyst replacement for the $365 million Te Mahi Hou petrol making unit commissioned in 2015, will be deferred.
Managing director Paul Zealand said the refinery's processing facilities will be operated on a rotating basis to continue fuel production at substantially lower rates. Safety-critical work will continue but all other work will be suspended.
The company is planning to operate the plant at these levels for three months. A decision will be made next month on whether to extend the arrangements beyond June.
"Our immediate focus through this period of uncertainty is to continue to operate the refinery and the refinery to Auckland pipeline safely, to meet customers' reduced need for high quality transport fuels, and to contribute to the security of New Zealand fuel supply," he said in a statement.
"Exactly how long we will need to operate in this new robust mode is yet to be determined."
Refining NZ shares rose 7.8 per cent to 69 cents. They have dropped 65 per cent since the start of December as coronavirus hit the Chinese economy, slashing demand for fuel and collapsing regional processing margins.
Marsden Point processed a record 42.7 million barrels of crude oil last year. It has been investing steadily to keep up with increased demand for jet fuel from increased tourism and greater diesel use due to the country's construction boom.
But coronavirus has slashed that demand. Last month, the firm withheld its dividend as it prepared for a tougher year ahead.
Zealand said the firm is aiming to operate on a cash-neutral basis this year, allowing for the fee-floor its major customers guarantee and the reduced income it expects from operating the fuel pipeline to Auckland.
He said the changes are necessary to meet the extraordinary challenges the plant faces, but acknowledged the real impacts they will have on people who had worked hard for the business for many years.
"Taking these actions now means that the company is well positioned to withstand an extended period of low demand as a result of Covid-19," he said.
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To help it get through, the company has increased its borrowing facilities by $50m and extended their term. Deferring next month's maintenance turnaround will take a big chunk out of the $70m capital expenditure the company had planned for this year.
Chair Simon Allen said the firm now has no significant debt maturing before March 2022 and total funding facilities of $400m, including $75m of subordinated notes on issue.
He said the firm's net debt as of today is about $251m, compared with $241m at December 31.
