Many of the world's 700-odd refineries, including Marsden Point, are operating at minimal rates or have brought forward maintenance to halt production and try to stem a global supply glut.
This time last year, refineries worldwide were processing about 80 million barrels of oil a day. That is expected to fall to 64 million barrels this quarter, the lowest in more than a decade, the International Energy Agency said last week.
Dallas-based consultancy Turner, Mason & Co warned more than a dozen smaller, older refineries with a combined daily capacity of up to 2 million barrels may not survive covid-19's impact on travel.
Will Marsden Point be among them?
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For the third time in 24 years the refinery's customers and major shareholders – Z Energy, BP and Mobil – will underwrite the plant's costs this year.
And during the next two months, Refining NZ will look at options for the "fundamental" change chair Simon Allen said is needed to the firm's business model and processing agreements if it is to stay competitive. Options include halting refining and converting the site to an import terminal.
Halting refining would be a big call for a firm which as recently as 2015 invested $365 million in new plant to increase the refinery's petrol-making capability and lower the site's costs and emissions. The company has also touted itself as the centre for a potential hydrogen-making hub in Northland.
But converting the site for imports is not without precedent. A decade ago Australia had eight refineries; it now has four and 90 percent of its fuel is imported.
And while the high Australian dollar and high labour costs were factors in the closures there, the big driver was the ongoing and increasing competition Allen pointed to from lower-cost refining capacity in Asia.
Dave Bodger, general manager of Gull New Zealand, said it's a trend he's seen many times. Smaller, older refineries built in the 1950s and 1960s and then successively upgraded have still been squeezed as Asian producers with lower labour costs have opened new plants six to 10-times larger.
"That makes it hard for the older guys to exist and carve out a niche for themselves," he told BusinessDesk.
But the potential range of outcomes from the review is wide and their timing uncertain. Bodger believes the review could prove a catalyst to break-up some of the historic industry structures that evolved with the refinery's development.
Would Gull, supplied by parent company Caltex Australia, be interested in getting fuel from the refinery, or at the Wiri fuel terminal at the end of the refinery's 170-kilometre pipeline to Auckland?
"Hell yes," he told BusinessDesk.
"To me that's one of the neat things, perhaps, that could come out of the review.
"You've got the three giants who are 'members of the club' maybe having a piece of the club broken up. Does that give other people an opportunity?"
Marsden Point, commissioned in 1964 to ensure secure supplies for the country, has been successively updated and expanded. It now processes about 42 million barrels of oil annually to make 70 percent of the country's fuel.
To keep doing that, it has to stay competitive with the product Z, BP and Mobil import from plants in Asia. It is paid processing fees based on margins in Singapore, adjusted for the cost of getting crude oil here versus the cost of shipping in made-up petrol, diesel and jet fuel.
But that structure comes with cost and complication. While the refinery has worked much closer with Z and Mobil in recent years to coordinate and optimise the grades of crude they bring to the refinery and the products it gets made into, it doesn't have complete freedom to run production as it would like.
The pipeline to Auckland lowers the cost of getting fuel into the upper North Island for the three majors, but they also have to carry the cost of the crude they import and the product sitting in tanks, as well as running two coastal tankers around the country to keep them full.
That business, Coastal Oil Logistics, also coordinates those deliveries with the imports its three shareholders are bringing in to ensure no region runs out of fuel.
And recent decision-making around those jointly-owned assets, like the Wiri terminal and the jet fuel pipelines to Auckland International Airport, has been more strained than when there were four major fuel retailers - Shell, BP, Caltex and Mobil – all with a similar market share and little competition.
Waitomo Group is one of the country's fastest-growing fuel retailers and gets its wholesale fuel supply from Mobil.
Managing director Jimmy Ormsby said the covid-19 crisis has focused people on the importance of secure supply routes for key materials and products.
A crude oil supply to New Zealand may be no more secure than product supplies, he said. But should a major Asian refinery blow up, or something else reduce production in the region, a local refinery and a crude supply would give New Zealand more options, he said.
That said, the country imports 30 percent of its fuel directly and demand growth could see that rise to 40 percent anyway. How much of a hedge does the country need and at what cost?
"Is that premium for security of supply worth it?"
"As long as we're not being disadvantaged commercially or there's no risk in terms of security of supply – we're happy," Ormsby said of the refinery's review.
Marsden Point paid more than $61 million in wages and benefits last year and employed 412 staff and 250 contractors. The company estimates that it supports 1,100 jobs in Northland and generates about 6.5 percent of the region's GDP.
Large industrial sites like the refinery, or a pulp mill, or an aluminium smelter, provide a base for engineering and other supporting trades in their regions that wouldn't otherwise exist.
And that support is not limited to the immediate region. At the height of the refinery's 2018 shutdown, an extra 1,200 contractors, fitters, scaffolders, drivers and crane operators from around the country were on site.
Chief executive Naomi James said there is still a lot that can be done to make the refining operation more competitive. But the firm also wants a better return on its other activities – such as jetties, storage and pipelines – and it also wants a plan for how it can use its assets and expertise as the country moves to lower-carbon options like biofuel and hydrogen.
The company, which plans to build a 31-hectare solar farm to meet a tenth of the refinery's electricity needs, is also looking at other options to lower its energy costs.
But the halving of oil prices this year – if sustained – may slow that transition to alternative fuels. And a sustained drop in air travel during the next couple of years would also hurt the refinery. Jet fuel accounted for almost a quarter of its production last year.
Getting the timing right isn't easy.
In 2003, ExxonMobil mothballed its Port Stanvac refinery in South Australia only to shut it outright six years later. It has spent the past decade rehabilitating the site, 14 hectares of which will later this year host a solar farm for South Australia Water.
In 2012, Caltex Australia announced the closure its Kurnell refinery near Sydney as part of a plan to turn the site into the southern hemisphere's biggest import terminal. It retained the slightly newer, but smaller Lytton refinery in Queensland and operates the two facilities to maximise profits from its fuel trading operation.
But the 2014 closure of the refinery came at the cost of 760 staff and contractor roles and a A$680 million bill to dismantle the plant and install additional storage.
Ormsby likens Marsden Point's review to the debate over the long-term relocation of the Ports of Auckland to Northport.
Buying fuel "off the shelf" from Asia may have advantages, but what is the risk of unintended consequences from the change?
Should the refinery shut, it would never reopen, he said.
"Could that capital be reallocated into other industries there where there is better growth potential, and is that going to be better for New Zealand Inc?"