Marsden Point makes margin gains with greater natural use

Friday 4th July 2014

New Zealand's Marsden Point oil refinery is taking advantage of historically low wholesale prices for locally produced natural gas to improve its refining margins as electricity companies, in particular, continue to use far less gas than in the past.

Refining NZ said in a statement it had achieved a 12 US cents per barrel uplift in Gross Refining Margins in May and June, 1 US cent better than planned, and that the company was "well on the way" to achieving its targeted 11 US cents per barrel improvement from the natural gas initiative over the course of the financial year.

Gas was cheapest in winter months when the dairy industry, also a major gas user, was at its seasonal low point for milk processing.

Wholesale gas prices have plummeted in recent years as a combination of weak electricity demand and the commissioning of a string of renewable wind and geothermal energy projects have markedly reduced the use of natural gas and coal to produce electricity.

That trend has already seen Canadian methanol producer Methanex restart and expand its three Taranaki methanol production trains after mothballing them during much of the 2000s, when gas prices were high and shortages were feared.

The gas move is one of four initiatives the refinery is pursuing, targeting a 66 US cents per barrel improvement in gross refining margins, which have been low over the past year, owing to a global glut of refining capacity.

Using more locally produced natural gas to fire its plant allowed the refinery to send less of its own product "up the stack" as fuel for the refining process and "to send those fuels out the door (to market) instead," said Refining NZ spokesman Greg McNeill.

As a result, the refinery had increased gas use by 50 Terajoules to 570TJ's in May and June this year, compared with the same period last year.

The growth in gas use had also been assisted by improved access to the pipeline capacity, which has been a bugbear for would-be new industrial gas users in the upper North Island, with pipeline limitations causing bottlenecks.

"We understand that the renegotiation of power station gas supply contracts has improved available capacity on the pipeline," said Refining NZ chief executive Sjoerd Post.

BusinessDesk.co.nz

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