Z Energy saves $50 mln capex in refinery crude-matching deal
March 5 (BusinessDesk) – Z Energy will defer $50 million of capital expenditure on new storage facilities at Tauranga
and Lyttelton by cutting a deal with BP and the operators of the Marsden Point oil refinery to coordinate the quality of
crude oil the refinery processes.
While the country’s two smaller players, Mobil and Chevron, aren’t part of the arrangement, the Z and BP tie-up allows
“more efficient use of Refining NZ (and) reduces Z’s procurement costs without committing capital,” said Z’s chief
executive, Mike Bennetts, in a statement.
“Z has been investigating spending up to $50 million on building larger import terminals at Mount Maunganui and
Lyttelton to lower the costs of refined fuel imports.
“While the consents for these new import terminals remain in place and represent a valuable option for Z, being able to
secure cost reductions through more efficient operation of Refining NZ removes the need to commit that $50 million of
capital,” he said.
Z shares rose 1.3 percent this morning to $3.78, while shares in New Zealand Refining, whose register is dominated by
the four major oil companies, was up 0.6 percent in trading this morning, at $1.77, although the shares have fallen 28
percent in the last year.
NZ Refining last week announced a loss for the year to Dec. 31 of $5 million, as global over-supply of refining capacity
and the strong New Zealand dollar squeezed refiners’ margins. The company also announced a $48 million equity-raising
this week, involving a placement with institutional shareholders that slightly dilutes the holdings of BP, Z, Mobil and
Chevron (operator of the Caltex brand), which did not participate.
The refinery’s chief executive, Sjoerd Post, said the plans would “with immediate effect” be “involved in the selection
of crude to be processed for Z Energy and BP in return for a procurement cost reduction for selected fuel products
produced for these customers as part of the existing processing agreement.”
“The new arrangement highlights the commercial benefits from running the refinery more efficiently with an optimal crude
‘diet’ and the change in customer expectations with the increasing availability of competitively priced products from
Asia-Pacific refiners.”
The shift reflected the emergence of customers which have no ties to global owners, such as New Zealand-owned Z, which
sees value in the refinery participating in the crude selection process, while other customers saw access to the local
refinery as just one part of their overall regional supply chain management.
Z and BP were the two companies that voted in favour of the $365 million Te Mahi Hou upgrade project, currently under
way. Mobil and Chevron opposed the move.
(BusinessDesk)