More cars and trucks on the road this week won't make the painful reckoning under way at Refining NZ any easier.
The Marsden Point refinery and its three big customers and shareholders – Mobil, BP and Z Energy - are bleeding cash as Covid-19 keeps much of the local economy idle and leaves the world awash in oil and the products the refinery competes to make.
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Any recovery in global refining margins later this year will be tempered by a prolonged stagnation expected in international tourism and demand for jet fuel – almost a quarter of the refinery's production last year.
The challenge for Marsden Point and its customers to find a new operating model is, as Forsyth Barr analyst Andrew Harvey-Green noted earlier this month, "huge".
But that hasn't stopped shares in the refinery rebounding from the 14-year low of 62 cents they reached late last month after the refinery went into its own lockdown, deferred a planned maintenance shut and started rotating reduced production through processing units to keep them operational at minimal levels.
Yields on the firm's subordinated notes had also retreated to 6.65 per cent by Friday, having almost doubled to 7.55 per cent in March.
At 92 cents on Friday, the refiner's shares value the business at $288 million, a third of that 18 months ago. The company has previously estimated the replacement cost of its plant, storage and 170-kilometre fuel pipeline to Auckland at $4.5 billion.
And that is half the problem. The pipeline, which delivered almost 21 million barrels of fuel to Auckland last year, regularly delivers more than $20 million in net profit annually.
But the vastly bigger refinery operates in a highly competitive, cyclical regional market and doesn't deliver at the same level. In the past six years it was strongly profitable once, broke even once, and posted losses twice.
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Even if the refinery were to close, Auckland relies on the fuel pipeline, so shutting the entire site isn't feasible.
As an import terminal infrastructure play the stock could be worth $2 a share, Harvey-Green said, but conversion would be costly and there are still many unknowns, including whether the revenues of such an operation would be regulated.
"We prefer investments with greater certainty in the current environment," he said.
But the refinery and its customers – on the hook for $140 million this year under the fee guarantee they provide – can't wait.
And the refinery sees a potential future in hydrogen and biofuel production, which would require a bit more kit than just pipelines, tanks and a jetty.
The refinery is a toll operation. Its customers buy crude oil, bring it to the refinery and specify the product they need. They meet the cost of the crude, product and transport, and pay the refinery 70 per cent of the plant's processing margin to reflect the costs they carry.
To maintain its volume, the refinery has to produce product cheaper than the imports its customers also bring in. Over the long-term it does but some years it hasn't.
But the plant doesn't control that crude and product mix so can't fully optimise its production. Neither can it opt for imports if that were cheaper. Not capturing all its margin also reduces the returns to its shareholders on any efficiency investments it makes.
Z Energy used the Commerce Commission's fuel market investigation last year to promote the conversion of the refinery to a merchant operation as a way to capture those efficiencies and reduce cost. The refinery could also potentially take on broader industry coordination roles, such as the coastal shipping and import co-ordination currently provided by Coastal Oil Logistics - a Z, BP and Mobil joint venture.
But that would still require contractual support of the three majors – all of whom are facing increased competition from the simpler, single-terminal import operations of Gull and, from mid-year, Timaru Oil Services.
And, unfortunately, the industry's track record on co-operation is not great.
In 2012, Mobil and Caltex – before its acquisition by Z – voted against Z and BP to oppose the $365m upgrade of the refinery's petrol-making processes completed in 2015.
More than 99 per cent of the non-oil company shareholders backed the plan.
And as recently as last year, the three companies couldn't settle on a process to agree new capacity investment for jet fuel supplies to Auckland International Airport.
Fundamentally, if they weren't tied to a coastal shipping joint venture to deliver fuel around the country from Marsden Point, why would they continue backing a local refining option if the long-term outlook is for cheaper imports?
Low crude oil prices improve the competitiveness of the local refining option. But, if regional margins are also to remain "structurally" low, why wouldn't the firms go straight to imports – except to be part of a national shift to lower-emission transport here?