fuelling New Zealand’s future
Our
Refining
Business
2010
fuelling Connections
The New Zealand refining company Limited
01Our company profile
02
Our timeline
03Our position in New Zealand’s
fuel supply chain
04Our refinery
06Understanding our results
06Income
09Subsidiaries
09Production
10Growth
11Distribution
12Reliability
13Energy
14Safety
14People
16 Communication
17 Community
our
company
profile
The New Zealand Refining Company
is New Zealand’s only oil refinery and
is proud to be a strong contributor to
both the local community and the
national economy.
Situated at Marsden Point near Whangarei,
the refinery was commissioned in the 1960s
and has since earned a reputation as one of
Asia Pacific’s safest and most reliable refineries.
Today the refinery processes a wide range
of crude oil types sourced from domestic and
offshore markets to produce premium and
regular petrol, diesel, jet fuel, fuel oil, roading
bitumens and sulphur.
Following a significant upgrade and expansion
in the 1980s and continued investment in newer
technologies in the last 20 years, the refinery
now has a crude oil capacity of 135,000
barrels a day.
contents
This allows NZRC to supply more than
70 per cent of all fuel products for the
New Zealand market, with almost half of all
fuel production sent to Wiri in South Auckland
via a purpose-built 170 kilometre pipeline,
for storage and subsequent distribution.
The petroleum industry was deregulated in 1988.
Today BP, ExxonMobil, Aotea Energy Limited
(operating as Greenstone Energy) and Chevron
are key customers and significant shareholders
in the refinery. The remaining shareholders,
numbering approximately 3,800, represent
a mix of corporate and private investors.
NZRC and its staff are strongly committed
to being a good neighbour and protecting the
pristine local environment, forming strong
relationships with government, Iwi, community,
business and conservation groups to achieve
this goal. All operations are carefully managed
to avoid, remedy or mitigate any adverse effects
on the environment, through environmental
monitoring certified to the ISO 9001 and
ISO 14001 standard.
Striving to always improve safety and reliability,
NZRC has commissioned two significant projects
in recent years – Future Fuels in 2005 and Point
Forward in 2009. The Future Fuels Project has
allowed the refinery to produce cleaner fuels
by providing the latest plant and equipment
necessary to remove sulphur from diesel and
benzene from petrol.
Point Forward is also a significant step forward,
including a substantial plant upgrade that has
increased overall productivity and grown our
business by 15 per cent.
With a staff of around 320 and an extended
team of local contractors, The New Zealand
Refining Company is committed to delivering
on its promises and achieving its vision of
Fuelling New Zealand’s Future.
01
02
The New Zealand refining company Limited
Our timeline
The company is responsible for processing feedstock (crude oil and blendstock)
into high quality transport fuels for our customers. Close to half of all finished
product is distributed via the Refinery Auckland Pipeline (RAP) with the remainder
distributed via shipping to ports and by road to the rest of New Zealand.
1956
NZ Government investigates
the viability of an oil refinery
in New Zealand.
Building begins on original
Marsden Point Oil Refinery.
1961
New Zealand Refining
Company Limited is formed.
1964
1969
Progressive expansion is
proposed but put on hold
by Government.
1979
Marsden Point refinery officially
opened and first fuel produced.
1973
Feedstock purchase and delivery to NZRC
World suffers first oil shock,
with price increase from USD3
to USD20 per barrel.
Political unrest in Iran triggers
second oil shock, with price
increase from USD13 to USD32.
Expansion of Marsden Point
refinery approved.
1980
1985
1982
Refinery successfully completes a five-month
shut down to make the tie-ins to the expansion.
170 kilometre long pipeline to Wiri is completed.
International markets
International loans raised
for expansion project.
39 Mbbls
Refining
Imported product
purchase
and delivery
48%
Wiri terminal and RAP (Refinery to
Auckland Pipeline) added to expansion project.
Contract for expansion finally signed.
Product
coastal
distribution
1986
1987
Petroleum Sector Reform Act is
introduced, leading to deregulation.
1999
Expansion completed at a cost of NZ$1.84 billion.
1988
28%
Newly structured deregulated environment
comes into being.
Negotiation begins with global oil companies
and processing agreements finalised.
34%
Coastal
terminals
Establishment of the Independent Petroleum
Laboratory Ltd on site at Marsden Point.
2009
Point Forward Project
commissioned, increasing the
refinery’s overall production
capacity by around 15 per cent.
4%
2005
Future Fuels Project
commissioned to allow for
production of ‘clean’ fuels.
2011
Board agrees $23 million for a Front End
Engineering Design (FEED) report, looking
at the opportunity to grow NZRC’s share
of the domestic petroleum market.
35%
Wiri
terminal
28%
72%
Imported product
NZRC product
Notes: Values and percentages are actual NZRC production and market estimates for 2010.
Values include petrol, diesel, jet fuel and kerosene, fuel oil and roading bitumen.
NZRC
NZ oil companies
2%
Product
pipeline
to Wiri
New Zealand product market (50 Mbbls)
Petrol (41%), Jet Fuel (16%), Diesel (35%),
Fuel Oil (6%), Bitumen (2%)
2000
New pumping station built at Wellsford to
support increased capacity of RAP pipeline.
46%
International companies
3%
Truck
loading
Exports and
bunker fuel
New Zealand supply chain
1962
Our company profile
Our position in
New Zealand’s fuel supply chain
03
04
The New Zealand refining company Limited
our
refinery
01 Jetties
05 Desulphurisation
The refinery has two jetties for berthing crude oil
and product ships, carrying up to 125,000 tonnes of oil.
The ships berth alongside the jetties and crude oil is
pumped off or product is loaded onto ships.
Crude oil contains sulphur which must be removed
to produce clean low sulphur products that meet
New Zealand’s high quality specifications. The refinery
has three desulphurisation units which remove sulphur
from diesel components and kerosene in catalyst filled
reactors, producing on-specification diesel and jet fuel.
02 Jetty Three
This jetty, commissioned during 2009, is used to berth
smaller ships (barges), which are capable of carrying up to
5,000 tonnes of fuel products. From this jetty finished product
is loaded onto a barge which supplies directly to cruise liners
and other ships in the port of Auckland.
03 Crude oil storage
01
The crude pumped from the ships berthed at the jetties
is discharged into a number of oil storage tanks. Our largest
tank holds 80 million litres of crude.
04 A Block
This block of refining units includes the crude distillation
unit and naphtha work-up plants. The first stage in the
refinery process is distillation, a process which separates the
crude oil into the different fractions or components. These are
naphtha (for producing petrol), kerosene, diesel components
and a residue stream. These streams then pass to other units
for further processing. There are two distillation units which
between them have the capacity to process 18,000 tonnes
of crude per day (around 135,000 barrels per day).
10
02
09
04
The $191 million Point Forward Project, commissioned in
2009, increased the capacity of one of the distillation units
from around 60,000 to 95,000 barrels per day.
08
06
05
05
07
The naphtha from the initial distillation process is too low
in octane for direct use in petrol. We need to make petrol
at 91 and 95 octane to meet the specifications. After removal
of sulphur, the naphtha is passed through reactors filled with
platinum catalyst and the low octane naphtha is converted
to high octane platformate. A handful of platformer catalyst
has a surface area equal to about three football fields.
The Future Fuels plant was a $180 million investment
commissioned in 2005. The plant removes sulphur from diesel
to below 10 parts per million, and reduces benzene in petrol
to meet New Zealand’s world class clean fuel specifications.
06 Hydrocracker
The hydrocracker is part of a number of processing units
to upgrade the residue stream from the distillation units into
higher value products. The hydrocracker converts most of
the residue streams from the distillation units to higher value
petrol, jet fuel and diesel components. This upgrading is by
means of a catalytic cracking process in four large reactors
in the presence of hydrogen at a pressure of around 140 bar.
Hydrogen is produced by reforming refinery gas streams in a
catalytic process. The unconverted part of the residue stream
is blended into fuel oil products.
07 Sulphur Recovery Unit
Three sulphur recovery plants process the H2S rich
gas recovered from the refining process. This includes
a $30 million SCOT unit (Shell Claus Offgas Treatment)
to lower the sulphur dioxide emissions to the environment
and to increase sulphur recovery to 99. 8 per cent. The
recovered sulphur is sold to Ballance Agri-Nutrients for
use in fertiliser production.
08 Control Room
The refinery operates 24 hours a day and is controlled
by shift teams of operators working from the control room.
From their computer screens the panel operators monitor
and control the many valves, pumps and equipment required
for the refining operation.
09 Blending and products storage
03
The process units produce a number of component streams
that are routed to tankage. These components are blended
into on-specification final products that are stored in product
tanks before being pumped via the pipeline or loaded onto
ships for distribution.
10 Pipeline
The pipeline to Auckland runs underground from the refinery
to a terminal at Wiri near Auckland International Airport.
Petrol, jet fuel and diesel are sent down the pipeline in
sequential batches using pumps at both the refinery and two
intermediate pump stations located at Wellsford and Kumeu.
05
06
The New Zealand refining company Limited
our
results
Income
Supported by our strategy:
Robust Profitability – Delivering
in a Volatile World
Other Income
(2010 $38.4m, 2009: $36.6m)
This is a notional refining margin generated
by NZRC and is calculated as the typical market
value of all the products produced, minus the
typical market value of all the feedstock processed.
When divided by the volume of feedstock
processed, it is expressed in dollars per barrel
(bbl), typically USD per bbl because international
prices are quoted in USD. The market value of
products is determined by using quoted prices for
the products in Singapore, which is the trading hub
for Asia-Pacific. To this is added the typical freight
cost to New Zealand (import parity value) plus any
product quality premiums. The value of feedstock
is determined by using the market value for crude
oil and other feedstock at the point of purchase,
plus the typical cost of freight to the refinery
(landed value).
2010
01WHERE DOES THE COMPANY
GET ITS INCOME FROM?
The company has two main operating income
streams – processing fee income and pipeline
fee income (part of the distribution income).
Processing fees are paid by NZRC’s customers
for refining their crude oil and other feedstock
into final products, and are set at a percentage
of the refining margin (see question 03) that is
generated by NZRC. Pipeline fees are paid by
NZRC’s customers for pumping refined products
via NZRC’s pipeline to Auckland, and are set
at a negotiated price per volume pumped.
Fees are also charged for other services, such
as for producing special grade products and
for blending of imported components.
The crude oils and feedstocks that are refined
into transport fuels at Marsden Point are owned
by the customers.
Total operating income generated by the Group
for the year ended 31 December 2010 was $288
million (2009: $247 million), analysed as follows:
Sources of Income
2010
2009
1%
0%
2009:
2010:
GAIN ON INVESTMENT PROPERTY
2009:
8%
7%
2010:
OTHER
18%
17%
73%
75%
2009:
2010:
WIRI RENTAL INCOME
2009:
2010:
DISTRIBUTION REVENUE
02 WHO ARE NZRC’S CUSTOMERS?
NZRC’s customers are the local subsidiaries of
BP, Chevron (marketing under the Caltex brand),
ExxonMobil (marketing under the Mobil brand)
and Greenstone (marketing under the Shell brand).
Greenstone has bought Shell’s refining and marketing
business in New Zealand and continues to market
under that brand. These customers all refine crude
oil at NZRC under separate processing agreements.
NZRC also sells liquid sulphur to Ballance AgriNutrients and carbon dioxide to Air Liquide, both
products being by-products from the processing
of crude oil.
15%
2009:
85%
13%
2010:
OTHER
87%
2010:
OIL REFINING
The processing fee formula is:
Processing fee (NZD) = 70 per cent x margin
(USD/bbl) x feedstock processed (bbl) /
exchange rate (USD/NZD).
The processing fee is therefore impacted by
product and feedstock prices in the international
markets, volume of feedstock processed and the
exchange rate.
12
10
NZRC’s processing fee income is the sum of
the customers’ processing fees. Each customer’s
processing fee is different because they each
process different volumes and types of feedstock,
and make different volumes of products.
8
6
4
2
Exchange Rate, US Dollar vs NZ Dollar
0
2003
2004
2005
2006
2007
NZRC CAP
2008
2009
2010
BP INDICATOR MARGIN
(SINGAPORE)*
*BP INDICATOR MARGIN SINGAPORE AS DEFINED
ON BP WEBSITE (note: bp has recently changed
the calculation of their indicator margin).
2009:
The processing fee is set at 70 per cent of
the refinery margin generated, subject to a fee
floor and margin cap. This reflects that NZRC’s
customers bear the risks and associated costs
of crude purchasing, the finance and currency
costs and risks associated with maintaining crude,
feedstock and product inventories, shipping
and demurrage risks and guarantee a minimum
processing fee. NZRC’s income for the period
is then converted to New Zealand Dollars
using the exchange rate for that period.
Singapore and NZRC Refining Margins,
US Dollars per Barrel
NZRC MARGIN
2009
04HOW IS THE REFINERY’S INCOME
CALCULATED AND WHAT FACTORS
IMPACT THE COMPANY’S INCOME?
03 WHAT IS THE ‘MARGIN’?
The indicator margin is a simplified margin
for a generic complex refinery in Singapore,
with simplified product yields and Dubai as only
feedstock. NZRC’s margin follows the same trend
as the indicator margin, but is different due to
NZRC’s location and differences in feedstock/
products mix.
1.0
0.8
0.6
0.4
0.2
0.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
Understanding our results
understanding
07
08
The New Zealand refining company Limited
Toll processors often only receive a flat fee for
processing customers’ feedstock. The processing
agreement that NZRC has with its customers
represents a “gain sharing” arrangement whereby
there is an incentive for NZRC to maximise the
value from the crude oil and other feedstock
that the customers provide.
The principles of the processing fee formula
were established in 1995. It is based on sharing
the refining margin according to the risks and costs
that NZRC and the customers respectively bear
within the total supply chain.
NZRC’s processing fee is calculated as 70 per cent
of the notional refining margin. This reflects that
NZRC’s customers bear the risks and associated
costs of crude purchasing, the finance and currency
costs and risks associated with maintaining crude,
feedstock and product inventories, shipping
and demurrage risks and guarantee a minimum
processing fee. The processing arrangements
are intended to provide NZRC with sufficient
funds for new investments and provide the user
companies with sufficient incentive to optimise
their use of NZRC facilities.
The current arrangements have stood the test
of time enabling NZRC to invest significantly, while
performing strongly on the NZ Stock Exchange
and encouraging our customers to fully utilise the
facilities. We review the arrangements to ensure
they remain reasonable to shareholders and
sustainable. In 2009 a review was carried out by
consultants Purvin & Gertz Inc. They concluded that
the processing fees charged by NZRC at 70 per cent
of the gross margin (with defined minimum total fees
and maximum gross margin cap) have not been
unreasonable to NZRC’s shareholders, relative to
the risks borne by NZRC and their customers.
A review of processing arrangements was also
carried out in 2010 by the Independent Directors
and presented to the Board.
The opinion expressed in that review was that
management had exercised an appropriate degree
of professional care and diligence to ensure that the
processing fee and other contractual arrangements
remain in the best interests of the Company. In
their opinion, the processing agreements support
the on-going competitiveness of the Company and
provide shareholders with commensurate returns
over the business cycle.
Management is tasked with keeping the processing
fee and other contractual arrangements under
review, to ensure that they remain in the best
interests of the Company. The Independent
Directors will review the status of the processing
arrangements with management annually.
06 W HAT IS THE MARGIN CAP AND THE
FEE FLOOR AND WHY HAVE THEM IN
THE PROCESSING AGREEMENT?
The margin cap applies for each customer separately
and is set at a maximum of USD9 per barrel per
calendar year. The floor provides income protection
when refinery margins and/or the exchange rate are
unfavourable. The fee floor comes into effect if the
total processing fee for a calendar year does not
exceed a minimum value. This value will be close
to NZ$118 million for 2011 and is subject to annual
Producers Price Index (PPI) and Labour Cost Index
(LCI) based escalation.
07HOW DOES THE VOLATILITY OF THE
INTERNATIONAL OIL MARKETS AFFECT
THE COMPANY?
Up and down movements of crude oil prices
are often mirrored by product price movements,
hence crude price volatility may not directly affect
the refinery margin. The movement of product
prices relative to oil prices affects the refinery
margin. While crude oil price movements are
fundamentally driven by supply and demand
for crude oil, refinery margin movements are
fundamentally driven by supply and demand for
refining capacity. Because NZRC’s margin is based
on Singapore prices plus freight plus premiums for
quality, changes in international freight rates and
in quality premiums also affect NZRC’s margin.
08WHO ARE THE COMPANY’S
COMPETITORS?
11WHERE DOES THE CRUDE OIL
COME FROM?
NZRC competes against products imported to
New Zealand ports. Most imports are sourced
out of Singapore, Japan, South Korea and Taiwan,
and therefore NZRC competes with export
refineries in the Asia-Pacific region.
NZRC’s refinery configuration allows for a
relatively flexible crude diet. Just over half of the
crude oil comes from the Middle East (typically
Saudi Arabia, United Arab Emirates and Qatar)
and the rest from Asia-Pacific (Malaysia, Indonesia,
Brunei, Australia and New Zealand). Some crude oil
from other regions (Africa, Europe and Russia) is also
received. New Zealand produced crude oil is more
suitable for refineries in Australia so NZRC processes
only some of the New Zealand produced crude oil.
Subsidiaries
Supported by our strategy: Robust
Profitability – Delivering in a volatile world
09DOES THE COMPANY HAVE A FINANCIAL
INTEREST IN ANY OTHER ENTITIES?
Understanding our results
05WHY DOES THE PROCESSING
AGREEMENT BASE THE COMPANY’S
REVENUES ON A SHARE OF THE
REFINING MARGIN?
09
2010
The Independent Petroleum Laboratory Limited
(IPL) was established in July 1999 and is 75 per cent
owned by NZRC. It is New Zealand’s largest fuel
testing laboratory.
IPL operates as an independent laboratory,
utilising knowledge and technology to provide
sound, innovative solutions to the analytical needs
of the petrochemical and related industries.
2%
IPL provides a wide range of the fuels, biofuels and
environmental analysis and testing to a wide range
of industry clients based in New Zealand and the
South West Pacific. Further information is available
on theasweb-site
Consumed
Fuel at: www.ipl.co.nz
2010:
NEW ZEALAND
3%
2010:
AUSTRALIA
2010:
40%
ASIA
55%
2010:
MIDDLE EAST
Production
Supported by our strategy: Supporting NZ’s
Growth – New Zealand’s Supplier of Choice
12 HOW BIG IS A BARREL OF CRUDE?
10HOW MANY BARRELS OF CRUDE DOES
THE COMPANY PROCESS IN A YEAR?
NZRC processes typically between 37 and 42 million
barrels of crude oil and other feedstock per year.
The actual volume in any one year depends on
the effect of shutdowns and the type of feedstock.
One barrel is 159 litres, or approximately three
times larger than the average fuel tank of a car.
One bbl of crude typically makes:
SULPHUR
0.3%
FUEL OIL 8.7%
Intake
Intake (bbls ‘000)
4.5% CONSUMED AS FUEL
2.3% BITUMEN
34.1% DIESEL
2010
2009
2008
2007
2006
38,952 37,935 39,194 36,865 38,766
JET FUEL
20%
0.8% NAPHTHA
Intake (tonnes ‘000)
Processing Intake
Blending Intake
4,998 4,807 4,9874,641 4,858
197
267
241 262 292
Total Intake
5,195 5,074 5,2284,903 5,150
PETROL
29.3%
10
The New Zealand refining company Limited
Outturn (tonnes ‘000)
2010
2009
2008
2007
2006
Mogas (Petrol)
1,3321,3861,484 1,4131,477
Light Naphtha
341328 410
1,7721,5811,6151,5811,659
Fuel oil
529695674549540
Roading bitumen
148119113131130
Sulphur
Supported by our strategy:
Supporting NZ’s Growth –
New Zealand’s Supplier of Choice
The RAP (Refinery to Auckland Pipeline) is
owned and operated by NZRC. It is a multiproduct pipeline that runs mostly underground
to a terminal at Wiri, near Auckland International
Airport. It operates continuously and product
batches are pumped in succession. The RAP
supplies most of Auckland’s petrol, diesel and
jet fuel needs, and additional product is trucked
from Wiri into the Waikato region.
19HOW ARE PETROL AND OTHER
PRODUCTS MANUFACTURED
BY THE COMPANY DISTRIBUTED
THROUGHOUT THE COUNTRY?
Petrol, diesel and jet fuel are pumped via
the Refinery to Auckland Pipeline (RAP) to
a terminal at Wiri in South Auckland to feed
Auckland and parts of the Waikato. Petrol and
diesel are pumped to a truck-loading terminal
adjacent to the refinery which supplies Northland.
Petrol, diesel, jet fuel, fuel oil and bitumen are
shipped to ports via coastal tankers to supply
the rest of New Zealand. Naphtha and some
fuel oil are exported. Sulphur and some bitumen
are loaded into road trucks at the refinery.
Should the Board decide to proceed then we
expect the construction phase to take around
three years with the first stage of commissioning
to be completed by late 2015.
3238383230
Supported by our strategy:
Supporting NZ’s Growth –
New Zealand’s Supplier of Choice
15 HOW DO WE GROW OUR BUSINESS?
2010
Pipeline Revenue ($ million) and
Throughput (Mbbls)
2008
2007
20
2006
19
18
30
Pipeline
Truck Terminal
45.2
46.7
46.5
50.2
47.4
4.5
4.8
4.7
5.2
5.0
46.5
42.3
43.3
40.4
43.4
Exports2.1
5.1
4.2
2.5
2.5
1.7
1.1
1.3
1.7
1.7
Coastal Shipping
Other
17
16
25
15
14
20
13
12
15
11
18HOW MUCH OF THE COUNTRY’S
FUEL IS PRODUCED AT NZRC?
10
10
Coastal Shipping Destination for 2010 (%)
2003
100%
90%
80%
15%
70%
10%
60%
5%
50%
NZ fuel demand data to 2009 from Ministry
of Economic Development’s Energy Data File
and 2010 fuel demand estimated by NZRC.
BLUFF
2010
TOTAL
DUNEDIN
2009
TIMARU
DIESEL
LYTTELTON
2008
NELSON
2007
JET FUEL
WELLINGTON
2006
NEW PLYMOUTH
2005
PETROL
NAPIER
2004
MT MAUNGANUI
0%
2003
2004
2005
2006
2007
PIPELINE REVENUE
25%
AUCKLANDWYNYARD
We will continuously improve our competitive
position versus imports and develop robust
options to grow our business further in the future.
The throughput is typically around 320,000 litres
per hour or a maximum of 420,000 litres per hour.
That is enough fuel to fill the tanks of 8,000 cars
every hour.
35
2009
20%
As New Zealand’s only oil refinery we have the
opportunity to grow as demand grows. Our target
is to supply up to 80 per cent of New Zealand’s
transport fuel (diesel, petrol, jet fuel). The
commissioning of the Point Forward expansion in
2009 has grown our transport fuels production by
around 15 per cent and we now supply more than
70 per cent of the country’s transport fuel.
21HOW MUCH PRODUCT CAN BE PUMPED
THROUGH THE RAP PER HOUR?
Distribution (Mass %)
The Front End Engineering Design report will
determine what resources will be needed for the
construction phase of the project. Over the next 12
months management will be pulling together further
detail for this report and expect to have this completed
for presentation to the Board in quarter one 2012.
Growth
Our aim is to be New Zealand’s supplier of choice
for transport fuel products and to grow with our
customers. This can be achieved through innovation
and understanding their strategic interests, so that
potential synergies can be captured and new
opportunities tapped.
The Company is continually looking at strategic
growth opportunities to take the business forward
and improve its share of the New Zealand domestic
market for transport fuel products. As part of the
Company’s strategic plan, management has been
looking at the attractiveness of investing $400-$500
million in a significant growth project based on
materially increasing the Company’s share of the
domestic gasoline (petrol) market from circa 50
per cent to 75-80 per cent. The Directors have
agreed to provide funding of $23 million for the
development of a Front End Engineering Design
(FEED) report which is expected to be completed
and submitted to the Board in quarter one 2012.
17If the project is approved how
long will it take to complete?
Jet Fuel and Kerosene 990869892839 911
Gasoil (Diesel)
20 WHAT IS THE RAP?
2008
2009
2010
THROUGHPUT
RAP THROUGHPUT (MBBLS)
14HOW MUCH PRODUCT IS
MANUFACTURED IN A YEAR?
Distribution
NZ$ (MILLION)
NZRC produces petrol, diesel fuels, jet fuel and
fuel oils as transport fuels. Other products include
roading bitumen, sulphur and naphtha (exported
as petrochemical feedstock). Some of the carbon
dioxide produced is recovered for use in soft drinks.
16 What is the growth project?
Understanding our results
13WHAT PRODUCTS ARE
MANUFACTURED BY THE COMPANY?
11
12
The New Zealand refining company Limited
23HOW DOES THE COMPANY ENSURE
PLANT RELIABILITY AND INTEGRITY?
Supported by our strategy:
Leading in Reliability, Safety and
Environment – Asia Pacific’s best
22HOW MANY DAYS IN A YEAR IS THE
PLANT AVAILABLE FOR PROCESSING?
NZRC operates around the clock throughout the
year. Some shutdowns of operating units take place
from time to time for maintenance and other activities
such as catalyst regeneration or replacement.
Operations staff and engineers continually monitor
the performance of all units operating within the
plant and plan for shutdowns over a period of several
years. Planning for shutdowns is complex. All areas
of the business must be mobilised to ensure that all
planned maintenance (and any emerging work) is
completed safely, on time and within budget, while
ensuring that sufficient product stocks are held to
meet customer demand during the shutdown period.
The following shutdowns are planned
for the next four years:
2011201220132014
QuarterQuarterQuarterQuarter
Crude Distiller -
1
3
NZRC has a comprehensive asset reliability and
integrity management focus which has, over the years,
continued to be highlighted as a key business strategy.
Continuous improvements have been achieved by
developing and improving a number of reliability,
inspection and maintenance strategies. In addition,
we have a project team focused on Reliability Integrity
and Process Safety (RIPS+) and our process specialists
are carrying out studies to identify and improve our
understanding of major hazards for the business.
This focus will improve our reliability, lead to a safer
plant, increased operational availability, improved
environmental management and better morale.
Adopting a multidiscipline team approach to asset
management and operational excellence has enabled
us to continue to deliver world-class results.
Energy
25HOW IMPORTANT IS ENERGY EFFICIENCY?
Supported by our strategy:
Robust Profitability –
Delivering in a volatile world
Energy efficiency improves our competitiveness
against Asian peer refiners, contributes to an
improved financial performance and reduces
our environmental impact.
24WHERE DOES THE COMPANY
GET ITS ENERGY FROM?
NZRC consumes energy in the forms of electricity,
imported natural gas and fuels derived from crude
oil – refinery gas, fuel oil and asphalt.
Electricity is supplied via the New Zealand grid
and is used to drive pumps, compressors and other
electrical equipment. The refinery’s demand for
electricity is approximately 32 MW, which makes
us one of the larger users of electricity in
New Zealand.
We also use a variety of fuels, mostly in furnaces, to
provide the heat and steam required for the refining
operation. The refinery consumes approximately
1,000 tonnes of fuel per day. Sources include fuel
gases generated in the processes, asphalt and fuel
oil and some natural gas.
Refinery Energy Profile
2010
-
Hydrocracker -*-2
We are committed to making energy efficiency
improvements under the Negotiated Greenhouse
Agreement (NGA) we have with the Government
– and we continue to meet our targets set out in
the NGA pathway.
26HOW WILL THE EMISSIONS TRADING
SCHEME IMPACT OUR BUSINESS?
Refining crude oil into fuel products is an energy
intensive process. Our energy use is reflected in
the direct emissions of greenhouse gas from our
site and the indirect emissions from the consumption
of thermally generated electricity.
In 2003, NZRC signed a Negotiated Greenhouse
Agreement (NGA) to minimise our greenhouse
gas emissions and assist New Zealand to meet its
Kyoto protocol commitments. In 2010 New Zealand
introduced an Emissions Trading Scheme (ETS)
from which we are exempt due to the NGA.
We are required to continue to improve our energy
efficiency within a defined pathway with the ultimate
aim of reducing the amount of greenhouse gas
discharged for every litre of fuel produced.
Platformer Catalyst -13 -
A review of the NGA is scheduled for 2012 to agree
the pathway through to 2022. We have committed
to achieving and maintaining best practice in energy
efficiency, a process started in 1996 when NZRC
signed a voluntary agreement with the Government.
Diesel Hydrotreater -13 -
*Top Bed Skim: short duration shutdown to remove
catalyst contaminants
5%
2010:
ASPHALT
5%
2010:
FUEL OIL
10%
2010:
NATURAL GAS
16%
2010:
ELECTRICITY
64%
2010:
REFINING GAS
Understanding our results
Reliability
13
14
The New Zealand refining company Limited
People
Supported by our strategy:
Leading in Reliability, Safety and
Environment – Asia Pacific’s best
Supported by our strategy:
People and Performance –
Being an Employer of Choice
27WHAT ARE WE DOING TO IMPROVE
OUR SAFETY PERFORMANCE?
28NZRC’S AIM IS TO BE AN EMPLOYER
OF CHOICE. WHAT DOES THIS MEAN?
For us, safety is about our people and we are
actively engaging our people to ensure our vision
of Safely Home, Every Day is one we all share.
Communicating our health and safety messages
and expectations effectively remains a priority.
We are continuing to develop our safety leadership
capability and to demonstrate visible leadership
commitment and show through action that health
and safety has priority in all the things we do. We
are maintaining a concentrated focus on ensuring
that the processes we use to understand the health
and safety related risks that arise from operating
the facility are robust and that the systems we
use to manage the risks are effective.
Being an Employer of Choice means that
talented people seek you out, give you their best
performance, and stay with you. An Employer of
Choice has a compelling characteristic that makes
them stand out: – their brand is distinctive and
recognisable, and they have a track record as a
successful organisation. An Employer of Choice
provides challenging and stimulating careers
for employees while offering highly competitive
employment conditions – including remuneration,
holidays, and development opportunities.
We are engaging with other organisations and are
active in best practice health and safety leadership
groups at both national and regional levels, giving
us the ability to positively influence as well as learn
from others.
NZRC’s human resources strategy is designed
to put in place all the elements that would make
us New Zealand’s Employer of Choice for talented
and motivated people. We are focussed on improving
our visibility in the employment marketplace, in
particular through our partnerships with leading
New Zealand universities.
29 W HAT STEPS ARE WE TAKING TO
BECOME AN EMPLOYER OF CHOICE?
We benchmark our remuneration and other
employment conditions against our peers to
ensure we remain competitive, and we offer
financial incentives for stand-out individual and
company performance. NZRC offers opportunities
for professional and personal development to
all its people, and we provide both technical and
management career paths for people who have
the right mix of skills.
We are aiming to make the quality of our
leadership our unique point of difference by
providing employees with high quality leadership,
and giving future leaders the chance to develop
their skills with one of New Zealand’s most
successful companies.
Understanding our results
Safety
15
16
The New Zealand refining company Limited
17
Understanding our results
Communication
Community
supported by our strategy:
Delivering on our Promises – developing
mutual trust, understanding and support
Supported by our strategy:
Delivering on our Promises – developing
mutual trust, understanding and support
30What awards has The New Zealand
Refining Company won?
Awards are both recognition for work well done and
a benchmark of how well our business is performing.
stiff competition from other corporate finalists,
Telecom, Auckland International Airport,
Christchurch International Airport, Marlborough
Lines and Zespri.
In June, our 2009 Annual Report received a bronze
from the Australasian Reporting Awards. To win
at first time of entry was particularly pleasing and
provided a valuable opportunity for our team to
share best practice in reporting.
Over the last 18 months we have been recognised
with a number of awards for our environmental,
leadership performance and the quality of our
communication with shareholders. Most notably,
we are one of only 45 Top Companies for Leaders in
the world, as recognised by recruitment consultancy
Hewitt Associates, RBL Group and Fortune Magazine.
With around 320 full-time employees, NZRC was
the smallest winning company in the survey, yet we
sit alongside global companies including General
Electric, Coca Cola and Proctor & Gamble.
The Annual Report conveys our
aspirations, achievements, and processes
and we are continually looking to raise
the bar on the standard of reporting
in a way that our shareholders will
understand and appreciate.
In 2010 the quality of our communication to
shareholders was again recognised. NZRC took
the top prize for corporate annual reporting at the
New Zealand Institute of Chartered Accountants
awards in Auckland. This was the third year in a row
that NZRC has won the award for ‘Best Annual
Report by a Corporate Organisation’ and faced
Also in 2010, NZRC was one
of only three companies in
New Zealand nominated
for Energy Company of
the Year at the inaugural
Energy Excellence awards
in Wellington.
31How does The New Zealand
Refining Company support
the community?
We are committed to contributing to the
economic, environmental and social sustainability
of our local community and look to develop mutual
partnerships where we can learn from each other,
through dialogue, sharing of knowledge, expertise
and labour, endorsement, grants and/or gifts in kind.
We have an established relationship with local
Iwi and work with them in a spirit of Kaitiakitanga
(guardianship) to help preserve our local environment.
In 2010 we joined other local businesses in providing
funding for the much needed refurbishment of
Takahiwai Marae. As part of a long-standing
commitment to helping young Maori achievers
we provided funding to our Patuharakeke scholars
to enable them to continue with their studies.
We support water safety through ongoing funding
for the Ruakaka Surf Lifesaving Club for the purchase
or replacement of essential life saving equipment.
NZRC also funds the day-to-day operations of the
Whangarei Volunteer Coastguard.
As part of our commitment to World Environment
Day in June, we provided funding for the Bream
Head Conservation Trust to conduct education
days with local schools, and to produce an online
education pack for teachers. Later in the year we
formally joined forces as a key sponsor of the
Trust’s full-time ranger.
Late in 2010 we became a sponsor of the
Northland Events Centre (NEC) at Toll stadium
in Whangarei. The NEC is a vital asset for the
Northland community. It provides a home ground
for the Northland Rugby Union, but is also a venue
for corporate and other functions and a growing
range of major sports events, including rugby league.
In February 2011 the Company officially opened
the NZRC Lounge with the support of over 800
staff, contractors and their families.
2010 was a year of significant loss for two
New Zealand communities to which NZRC
and our employees responded. In September
the Company and its employees donated to the
Canterbury Earthquake Appeal and in November
we gave to the fund established for the families
of the 29 Pike River miners who lost their lives.
The New Zealand Refining Company LimiteD
Port Marsden Highway, Marsden Point, Whangarei, NZ
Tel: +64 9 432 8311 Fax: +64 9 432 8035 Email: [email protected]
www.nzrc.co.nz