16 Apr 2014

Shutdown a one-off - Refining NZ

7:27 am on 16 April 2014

Refining New Zealand is confident the prolonged shutdown of a key part of the refinery is just a one-off situation.

The company on Tuesday said it had extended the shutdown of its hydrocracker unit for a further 10 days because a key compressor had failed and needed to be replaced. It was the second extension of the shutdown, which began in the first week of March.

Chief executive Sjoerd Post said he was disappointed the shutdown had to be extended.

"It's an absolute one-off. It's been a very big shutdown.

"Just to give a sense of perspective, normally on site we have 500 staff. During the height of the shutdown, we had 1300 people on staff, so we had 800 people doing maintenance across quite a few of the blocks of the refinery, each of which have come back perfectly."

However, there were issues with the hydrocracker, which was unfortunate and had left staff disappointed.

"But it is what it is ... and we'll back in action very soon."

The company expected a one-off financial impact, reducing its processing fee revenue by $US10-$US15 million. It also expected to process 40.5 million barrels of oil this calendar year, down from the originally planned 41.5 million.

Having the hydrocracker offline restricts the company's ability to upgrade lower-cost feedstock into high-value products.

Its profitability is already under pressure - it reported a $5 million annual loss for calendar 2013 because of the strength of the New Zealand dollar and excess refining capacity in the industry globally.

Forsyth Barr analyst Andrew Harvey-Green said the hydrocracker would have been out of action three weeks longer than planned.

The impact in the short term was quite material but the refinery had been good in the longer term at coming back from such outages without too many problems, he said.

"So long as this is a one-off issue and we don't see this as becoming part of a longer term issue in terms of the refinery coming back on time from its outages, then it shouldn't have too many long-term impacts," Mr Harvey-Green said.