Parts of the refinery could be mothballed for biofuel production

Refining NZ chief executive Naomi James (second from left) at a public consultation session at McLeod Bay Hall. Photo / Imran Ali

Only the parts of the Refining NZ site at Marsden Pt that have potential for biofuel production could be mothballed once the refinery changes to a fuel-import terminal.

The refinery chief executive, Naomi James, told those present at a community session at McLeod Bay on Wednesday evening a number of options were being looked at on the best use of assets that may not be required in the future.

Shareholders of the country's only oil refinery last week voted overwhelmingly for Refining NZ to become an import-only fuel terminal under the name Channel Infrastructure following the strategic review.

The review followed an unexpected and significant fall in refining margins due to the build-up of refineries across Asia and ahead of a growth in demand, as well as a drop in fuel sales across New Zealand during the lockdown early last year.

James told a small gathering of about 25 people, including councillor for Whangārei Heads Greg Innes, there may be an opportunity to sell some of the assets and keep others to be re-used, and those that were demolished would be recycled as scrap metal.

"We can mothball some that has potential for biofuel production, not the whole site as the National Party suggested," she said.

The company has set aside between $200 million and $250m for works including decommissioning, terminal upgrade, and workforce transition some of which would take a number of years.

Refining NZ may mothball only the parts of its Marsden Pt site that have potential for biofuel production. Photo / Supplied

Innes questioned whether bitumen — a residue from petroleum distillation used for road surfacing and roofing — would be imported through the refinery terminal, given the fact the company stopped making it early this year.

Importing bitumen was a considerable cost to local government authorities working on roads, he said.

James replied the refinery was discussing the issue with Waka Kotahi which made up most of the bitumen market in New Zealand.

"There was significant investments that needed to be made in our bitumen facilities to keep them going so we went to our customers when we were working through simplification and said if you want to maintain this facilities, this is what's it's going to cost in running them.

"They didn't want to do that. I know there's been some frustration from the Government about that because it is costing more to import bitumen right now but part of what we are doing now is in fact having a direct discussion with government who make up most of the bitumen market.

"If there's an opportunity to do something at Marsden Pt that's going to support bitumen supply in Northland, potentially to other parts of New Zealand, then we're really keen to explore that."

The refinery's bitumen production before Covid was about 300 tonnes a day.

Questions were also asked about the decommissioning process, concerns around site contamination, and the change in management structure once the company moved to the fuel-import terminal model.

With the Government, James said discussions centered around what they saw as the strategic importance of maintaining the refinery, what would they do which would support maintaining the business, how did they think of the refinery from a capability perspective, and where it fits into the plan to decarbonise transport fuel.

Refining NZ, she said, didn't seek taxpayer subsidies because it needed to create a business that was sustainable in the long term.

On plans for biofuel production on site, she said hydrogen was one of the potential options as it was another way electricity could be stored for when power supply was threatened as happened up and down the country this week.

"We know transport fuel is one of the big things we have to solve as part of the decarbonisation challenge. We know for light vehicles, the path is predominantly electrification over the next 15 years.

"For heavy transport, the path is probably a combination of electrification, bio fuel, and potentially at a future point hydrogen. But we also know for aviation, potentially for long haul aviation we need bio fuels, we need liquid fuel solution."

The final approval on a fuel-only import terminal will be made by the refinery's board of directors at the end of September.