NZ Refining margins improve as crude oil prices fall

New Zealand Refining, which operates the Marsden Point refinery, expects to be more competitive as margins improve with the falling price of crude oil, and has almost repaid the outstanding processing fees it charged its shareholding customers that was triggered by a downturn in refining margins.

The Whangarei-based company's gross refinery margin rose to US$7.54 per barrel in September/October from US$6.75 a barrel in July/August, as it benefited from favourable crude prices, it said in a statement. The refiner generated $42.3 million in processing fee income, enabling it to repay $21.3 million to its oil company customers who had made top-up payments of $36 million in the first six months of the company's financial year. The outstanding fee floor amount is just $1.5 million.

The processing fee paid to the oil companies sees them get a rebate of 30 percent of the gross refining margin, and has come under attack by minority shareholders who have faced significant falls in the share price. The shares rose 2.2 percent to $1.89 today, and have shed about 10 percent this year.

Crude oil prices fell to a four-year low amid signs the Organisation of the Petroleum Exporting Countries is reluctant to cut output in the face of a global supply glut. The price of brent crude oil for December delivery was recently at US$77.83 per barrel.

"Low crude pricing improves Refining NZ's competitiveness against imported product, due to lower inventory costs for its customers," the company said in a statement.

NZ Refining said it expects to deliver promised cost savings this year, with total expenses of some $150 million, stripping out $15 million of costs rather than the $7 million cut originally eyed.

(BusinessDesk)