As shareholders prepare to vote on a proposed import terminal model, the financial and economic impact Refining NZ's whittled-down operation would have on Northland's economy is worrying community leaders.
Voting, to take place in Auckland this morning,
will not be the final investment decision, which will be taken by the Refining NZ board towards the end of September.
The country's only oil refinery has announced an in-principle agreement on key commercial terms with Z Energy for converting operations to a dedicated fuel import terminal. This follows a similar agreement reached with BP in February 2021.
The company posted an annual loss of $198.3 million last year due to a glut of fuel supplies globally, combined with the impact of Covid-19 on refinery output, pipeline fees and plummeting demand for fuel.
First Union represents 170 operational workers at the refinery said a move to being an import terminal would have a catastrophic impact on Northland as a whole as Refining NZ paid more than $60m in wages each year.
The union's site delegate and refinery control room operator, Aaron Holroyd, will lose his job after 35 years, together with more than 100 others next year, if the import terminal model goes ahead.
"If you import crude oil and jets are not flying, suddenly you make that crude oil into diesel. There's a lot of flexibility in the refinery but if you get rid of all that, you just import something from very tenuous supply lines.
"There's no substitute for diesel and jet fuel out there. People still need to drive trucks with diesel in them, still need to fly planes with jet fuel in them. They all come from this refinery or overseas."
Holroyd said the refinery workers contributed $15m in taxes each year and spent a lot of disposable income in Whangārei, and this spending would disappear.
His message to the refinery shareholders is to vote in favour of the status quo because the business has a lot of potential.
"Over the last 15 years, $750m worth of new equipment have been built for this refinery so it hasn't just done nothing. It has had lots of updates."
In its submission on the change proposal, the First Union said Refining NZ's 2020 Annual report showed more than 90 per cent of its staff earned more than $100,000 a year and more than 50 per cent were on over $150,000.
A report by the New Zealand Institute of Economic Research found income by the refinery staff and contractors directly helped retain nearly 500 households in Northland, the union said.
"The refinery contributes significantly to the Northland regional economy, and is estimated to be responsible for approximately 7 per cent of regional GDP, some $428m per year. Refining NZ generates around 636 direct jobs, among the highest-paid in the region," First Union transport, logistics, and manufacturing secretary Jared Abbott said.
He said the proposed estimated stepdown of resources showed a reduction from about 300 employees down to 60 within 20 months of the terminal conversion.
Abbott claimed the conversion to an import-only terminal could cost between $650m and $700m and said there was little public information about the level of contamination at the site, which has been under a self-monitoring regime for decades.
"Shuttered refineries in Australia have left high levels of contamination and a major demand for rehabilitation works, as well as having a massive impact on local communities.
"It's vital that remedial work is costed correctly so that shareholders are aware of the magnitude of risk they will be taking on."
Abbott said a large number of refinery workers were already leaving in frustration at what they perceived as a rushed process, and if the refinery remained understaffed during the transition and wind-down, it could risk a hard shutdown of the plant.
While closing the refinery may lower domestic emissions, Abbott said it could very well increase global emissions, as refining was outsourced to other refineries in other parts of the world that were subjected to less stringent standards regarding emissions, labour and the environment.
A refinery spokeswoman said the company did not recognise the figures First Union bandied around in terms of conversion to an import-only terminal.
"Our planning indicates the costs of conversion will require an initial capital investment of $200m to $220m over 5-6 years following a final investment decision and $50m to $60m for the demolition of decommissioned refinery assets."
Ruakākā Economic Development Group chairwoman Janine Abernethy said an import-only terminal model would give workers not required at the refinery or those who wanted to move on the chance to get trained in jobs Northland was screaming for.
"It's not all doom and gloom. The demand for fuel is going to minimise so let's see what kind of innovation the refinery comes up with. They've been here for 60 years and they've certainly looked after Northland during this time.
"Northland's unemployment rate at present is 5 per cent and businesses are screaming out for people to take up jobs. And while people may have to change jobs, they won't struggle to find them given the economic outlook," she said.
Abernethy said while the refining side of the business may go depending on the final decision, oil would still be imported and stored, which meant jobs would still be required.
The Ruakākā Ratepayers and Residents Association expressed similar sentiments, saying people needed to be realistic given the situation with Covid and declining fuel demand.
"While the impact on our economy would be huge, given the number of people and contractors employed at the refinery, it's extremely difficult for the refinery to make money," chairman Jules Flight said.
"But the upside is the refinery will continue as an import terminal so they'll still have quite a number of staff, and that will continue to add value to the community.
"Overall, it's hugely disappointing. We've lost the power station and this place was an energy hub but isn't anymore. It's a hard pill to swallow," he said.
Whangārei mayor Sheryl Mai said her heart went out to the refinery staff and businesses that faced an uncertain future but she hoped employment opportunities would come by, as Northland's economy has been growing.
"I would hope that if the refinery chooses to become an import terminal, this will ensure some ongoing employment and investment in our district, reducing the impact on the wider Ruakākā community.
"I would expect that central government will have a role to play in managing the situation, as it does when any industry of national significance faces challenges of this magnitude."