Refining NZ will cut 100 jobs and scale back its production from next year as part of a proposal to simplify refinery operations following a tumultuous year.
That's a quarter of its current 400-strong workforce and comes just weeks after nearby Carter Holt Harvey laminated veneer lumber (LVL) plant culled more than 150 jobs— more than two-thirds of its workforce.
A further 111 workers at CHH's Whangārei sawmill lost their jobs early this year.
Under the proposal, Refining NZ will, from next year, reduce production from 115,000 barrels per day to about 90,000 - the same throughput as in 1995 - and stop producing bitumen - a residue from petroleum distillation and used for road surfacing and roofing.
The refinery didn't say how much bitumen it produces each year.
This year's crude oil production is expected to be about 90,000 bbls/day.
• Union warns Marsden Point refinery restructure could cost hundreds of jobs
• Marsden Pt Refinery contractor struggling with surplus staff
• Refining NZ to take $220m hit due to Covid-19 slump
The company will reduce its operating expenditure by $20 million, capital expenditure has been forecast at $50m, and the estimated restructuring costs of $5m this year will be funded using proceeds from asset sales.
Falling fuel demand during level 4 lockdown drove the publicly-listed company $186.4m into the red over the first half of the year to June 30.
The interim net loss compares with a $3.5m shortfall in the corresponding period last year.
Refining NZ has engaged with customers to evaluate a possible future-staged transition from a being a refinery to an import terminal.
Chief executive Naomi James said the company has looked at all options as part of its strategic review and determined this was the best way to enable the refinery to safely continue running next year, despite challenges resulting from low refining margins globally and the impact of Covid-19 on fuel demand.
"We are working closely with local, regional and national authorities and agencies to help our people impacted by these changes, and to minimise the impact of these changes the Northland region."
Whangārei mayor Sheryl Mai said it would have been a tougher call for Refining NZ to look at a changed way of operation.
"Having said that, I also know there are so many other things that are happening, particularly around the Bream Bay area which is cause for hope for people looking at other jobs."
She said her council was working closely with economic development agencies to ensure they were doing all they could to soften the blow from job losses.
Northland Transport Alliance said since the importation of bitumen was common, hopefully the impact of the refinery stopping its production would not have too much impact on the roading industry.
Strategy and planning manager Jeff Devine said bitumen was supplied by contractors through contracts to councils in the region rather than territorial authorities buying it directly.
According to Stats NZ, the country imported 25,631 tonnes of petroleum bitumen last year.
Most of the contractors, Devine said, probably got their bitumen from the refinery but some of the larger contractors imported it normally for their own use.
"The price paid for bitumen in our maintenance contracts, which includes the resealing of the districts' roads, is based on the tendered price for the maintenance contract, but cost fluctuations are paid based on the spot price for bitumen at the time the work is undertaken.
This process was managed at a national level by the NZ Transport Agency and shared the risk of cost fluctuation across all parties, Devine said.
Northland Chamber of Commerce chief executive Stephen Smith said job losses at large scale sites were huge as re-employment became difficult for those with technical skills and higher salaries.
"The specialist employees at the refinery are earning over $100,000 a year on average and that's a powerful element of discretionary spending in Northland," he said.
Smith said the chamber was working with the Ministry of Social Development and Northland Inc to fill some of the gaps created by job losses.
First Union said the review was an opportunity to re-deploy existing assets and infrastructure at Refining NZ towards a range of cleaner and greener energy proposals like biofuel and green hydrogen.
"It isn't too late to save more jobs, assets and infrastructure while transitioning to cleaner and greener operations if the Government is serious about a Just Transition for Marsden Point," union organiser Justin Wallace said.
Marsden Pt was also highlighted in the Wood Fibre Futures Stage One report as potentially important infrastructure in a domestic fuel industry based on wood fibre that could be exported internationally, he said.
"No one is under any illusion - the sun is setting on fossil fuels, and the Covid-19 pandemic has altered market demand for aviation and other fuels. It's inevitable that things need to change at Marsden Pt immediately."
Refining NZ proposal after first phase of its Strategic Review:
- Reducing refinery throughput from 115,000 barrels a day to 90,000
- Stop production of bitumen
- $20 million reduction in operating expenditure compared with 2020
- Total capital expenditure forecast at $50m
- Estimated restructuring costs of $5m this year will be funded using proceeds from asset sales.