Refining New Zealand is planning to reduce production, make a quarter of its workforce redundant, and cut costs in a further step to becoming an import only facility.
Marsden Point oil refinery Photo: 123rf.com
The company, which operates the Marsden Point refinery, has been reviewing operations as its finances have been hit by low oil prices, cheap supply from Asia, and reduced demand because of the pandemic.
It said it had now finalised an operating plan for next year, which would see it cut production to 90,000 barrels of crude a day, a level last seen in 1995. It would also stop bitumen production.
"We have looked at all options and determined that this is the best way to enable the refinery to safely continue running in 2021," chief executive Naomi James said.
The plan would see the workforce reduced by 100 jobs to about 300, and save about $20 million in operating costs.
The cost of the restructure would be about $5m and would be funded by the proceeds from asset sales.
The refinery has been battered over the past two years by a slump in oil refining margins, its main source of revenue, as world oil prices fell and the market was flooded by a glut of cheap fuel.
It has invoked a mechanism called fee floor, under which its three main shareholders and customer - BP, Z Energy, and Mobil - pay a guaranteed fee to have their crude oil processed.
The company made a loss of $186m for the sic months ended June.
Refining NZ said it was moving on with a plan to end processing at the Marsden Point refinery and become an import-only facility, although any decision to proceed with the conversion would be subject to a vote by minority shareholders.
The refinery supplies all the country's shipping fuel, most of its aviation fuel, two-thirds of its diesel, and more than half of the petrol consumed.
