Union warns Marsden Point refinery restructure could cost hundreds of jobs

NZ Refining is undertaking a review of its operations at Marsden Point, which unions warn could cost hundreds of jobs. Photo / Michael Cunningham

New Zealand's only oil refinery appears to be headed towards conversion to a terminal to import refined fuel and deliver it to Auckland, which a union warns could cost hundreds of jobs.

Opened in 1964, the refinery at Marsden Point in Northland uses mostly imported crude oil to produce the bulk of New Zealand's refined petroleum products, but has been hit by falling margins amid over-supply of refineries, particularly in Asia.

Shares in the company have fallen by around two thirds over the past year, dropping 2 cents to 71c on Tuesday.

In April its owners, Refining NZ, announced a strategic review to improve returns to shareholders.

The pipeline which connects the refinery to Auckland is the main supply line for New Zealand's largest city, which means closing the operation is not feasible.

While Refining NZ chairman Simon Allen said the review would consider ways to improve the competitiveness of its refining operations, or to separate the infrastructure and refining operations, it would also look at whether Marsden Point could "convert to a fuel import business model".

Conversion to an import terminal would be the "counterfactual all other options will be tested against", analysts at Forsyth Barr said.

In late June the company said it would develop plans to simplify its refinery operations and cut operating costs. "In parallel the company will continue to evaluate a possible future staged transition to an import terminal," Refining NZ said.

Allen said while Refining NZ was committed to delivering the best outcome for shareholders over the long term "we are conscious of the significance of the options under consideration and the potential impacts on our people and the local community".

John Kidd, head of research at Enerlytica, said "the tea leaves" were pointing towards the end of refining operations in Northland, which could be a blow for the region.

"It would essentially become another in the network of the dozen or so port-receiving terminals that already operate around the country to handle refined fuels," Kidd said.

While this would make "good sense given the trading outlook it faces" for refining margins in the region "the loss of refining operations and the highly skilled and paid jobs that go with that would be a major blow for the Northland region".

According to Refining NZ's 2019 annual report, more than 300 of its employees earned more than $100,000.

A union says its representatives would meet the company next week to discuss the review.

First Union organiser Justin Wallace said the proposals threatened hundreds of jobs.

The union understood the company's need to review its operations, Wallace said, but any job losses at the plant and among its suppliers would be tough in the region.

Wallace predicted that importing refined petrol products could add to the cost of petrol at the pump for motorists.

First Union had hoped that hydrogen produced with electricity from a planned solar farm may have offered a new life for the refinery but that seemed now to be on the backburner.