Refining NZ Operational Update for March/April 2019

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17 May 2019

Refining NZ Operational Update for March/April 2019














COMMENTARY
Refining - Margins and throughput
Sustained good hydrocracker throughput and excellent plant uptime combined with refinery throughput of
7.31 million barrels and a Gross Refinery Margin of USD 6.63 per barrel has seen the Company earn NZD 50.1
million in Processing Fees for March/April.
The refinery achieved excellent Operational Availability of 99.9% during the March/April period.
Global refining margins recovered somewhat from the lows experienced during the January/February period
although margins were constrained by the rise in crude oil prices caused by geopolitical issues. Gasoline
margins improved due to large stock draws in the USA and unplanned outages in Asia while lower Chinese
diesel demand and increased diesel export quotas softened diesel margins. Asian fuel oil margins came under
pressure due to high inflows from outside the region.
HIGHLIGHTS
Continued strong operational performance with high hydrocracker throughput and good operational
availability that led to refinery throughput of 7.31 million barrels.
__________
The Company earned NZD 50.1 million in Processing Fees for March/April.
__________
Refining NZ’s Gross Refining Margin (GRM) was USD 6.63 per barrel, a strong uplift over the Singapore
Dubai complex margin.
__________
Global refining margins recovered somewhat from the lows experienced during the January/February
period although margins were constrained by the rise in crude oil prices.
__________
Volumes of products delivered through the refinery to Auckland pipeline remained strong.
__________
Outstanding process and personal safety performance was achieved:
- No Tier 1 or Tier 2 process safety events in the March/April period; and
- No recordable or lost time injuries since November 2018.
__________
Overall operating and capital costs have been controlled tightly versus budget, despite pressure from
higher electricity prices.

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The Singapore Dubai complex margin for the March/April period was USD 0.75 per barrel, impacted by the
factors above and also by low naphtha margins. Refining NZ’s March/April uplift over the Singapore Dubai
complex margin was strong at USD 5.88 per barrel enabled by stable refinery operation, a balanced product
slate and locational advantage.
The average exchange rate for the March/April period was USD/NZD 0.68.
Refinery throughput in the March/April period was healthy at 7.31 million barrels. This was impacted slightly
by the natural gas supply shortfall resulting from on-going maintenance on the Pohokura offshore gas field
facilities. The field operator now plans to complete the required maintenance and restore supply by the end
of May.
Refining NZ built its natural gas portfolio on the spot market and, as spot market prices were higher than
Refining NZ’s term gas contract, this had a negative impact on GRM of USD 0.11 per barrel for March/April.
However, this remained preferential to firing more valuable liquid fuels.
Distribution – Refinery to Auckland Pipeline
Pipeline operational availability was high and volumes of products delivered through the pipeline remained
strong.
Health, safety and environment
Process and personal safety performance were outstanding with no Tier 1 or Tier 2 process safety events in
the March/April period and no recordable or lost time injuries since November 2018.
Costs
Overall operating and capital costs have been tightly controlled versus budget despite ongoing pressure from
higher electricity prices.

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OPERATIONAL DATA


Mar/Apr
2019
Mar/Apr
2018
YTD
2019
FY
2018



Health, Safety & Environment


LTI
#
0 1 0 5
LTIF
#/200,000hrs
-
- 0.41 0.48
TRC
#
0 1 0 8
TRCF
#/200,000hrs
-
- 0.61 0.76
Tier I Process Safety Events
#
0 0 0 2
Tier II Process Safety Events
#
0 1 0 3
Releases outside of consent
#
0 0 0 5




Refining


Brent Crude Oil Price
US$/bbl
68.7 68.9 65.2 71.2
Exchange Rate
US$/NZ$
0.68 0.73 0.68 0.69
Operational availability
%
99.9 98.7 99.9 90.7
Refining throughput
Mbbl
7.31 7.00 14.28 40.44
Gross Refining Margin
US$/bbl
6.63 6.82 5.78 6.31
Gross Refining Margin
(excluding Fee Floor/Margin Cap)
US$M
48.5 47.5 82.5 255
Processing Fee (after Fee Floor/Margin Cap)
US$M
34.0 33.2 57.8 178.6
Processing fee (after Fee Floor/Margin Cap)
NZ$M
50.1 45.8 85.1 258.7




Distribution


RAP throughput
Mbbl
3.5 3.6 7.0 21.0


Notes:
1. The information provided in this announcement excludes revenue from distribution or other activities.
2. The Processing Fee results reported in this announcement are subject to change due to post announcement price
updates and independent audit.
3. A five year history of Throughput, Margins and Processing Fees is attached below.
4. Refer to the explanatory notes/glossary for a definition of terms.

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HISTORICAL INFORMATION - REFINING

20152016201720182019
Ja n/Fe bBa rre l s 000's7,0566,8267,1607,0116,963
RNZ USD GRM pe r ba rre l
1)
9.917.966.587.544.88
Si nga pore Duba i Compl e x GRM5.404.953.423.37-0.32
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.513.013.164.175.20
NZD Proce s s i ng Fe e (mi l l i on)
2)
59.657.045.950.834.9
Ma r/AprBa rre l s 000's7,4117,4715,1406,9587,312
RNZ USD GRM pe r ba rre l
1)
8.771.849.356.826.63
Si nga pore Duba i Compl e x GRM4.823.183.023.750.75
Upl i ft vs . Si nga pore Duba i Compl e x
3)
3.95-1.346.333.075.88
NZD Proce s s i ng Fe e (mi l l i on)
2)
62.314.848.145.850.1
Ma y/JunBa rre l s 000's6,4166,8377,7553,910
RNZ USD GRM pe r ba rre l
1)
8.556.267.630.18
Si nga pore Duba i Compl e x GRM4.242.132.902.02
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.314.134.73-1.84
NZD Proce s s i ng Fe e (mi l l i on)
2); 5)
48.943.358.40.7
Jul /AugBa rre l s 000's7,5196,8337,5117,615
RNZ USD GRM pe r ba rre l
1)
7.666.208.876.86
Si nga pore Duba i Compl e x GRM2.521.864.702.57
Upl i ft vs . Si nga pore Duba i Compl e x
3)
5.144.344.174.29
NZD Proce s s i ng Fe e (mi l l i on)
2)
63.541.363.654.3
Se pt/OctBa rre l s 000's7,2217,2516,8167,639
RNZ USD GRM pe r ba rre l
1)
9.477.499.317.09
Si nga pore Duba i Compl e x GRM5.123.184.732.47
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.354.314.584.62
NZD Proce s s i ng Fe e (mi l l i on)
2)
71.852.562.257.8
Nov/De cBa rre l s 000's7,0177,4477,3427,307
RNZ USD GRM pe r ba rre l
1)
10.829.206.836.53
Si nga pore Duba i Compl e x GRM6.374.193.671.80
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.455.013.164.73
NZD Proce s s i ng Fe e (mi l l i on)
2)
73.067.650.749.2
TotalBarrels 000's42,63942,66541,72440,44014,275
USD GRM per barrel
1)
9.206.478.026.315.78
NZD Processing Fee (million)
2)
379.2276.6328.9258.785.1
YTD Cap adjustment14.4
NZD Processing Fee (million)
1)
1) Excl ude s Fe e Fl oor/Ca p a djus tme nt
2) I ncl ude s Fe e Fl oor/Ca p a djus tme nt
3) RNZ upl i ft vs . Si nga pore Duba i Compl e x GRM i s i n USD pe r ba rre l

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EXPLANATORY NOTES/GLOSSARY
LTI (Lost time injuries) and LTIF (Lost time injury frequency)
Lost time injuries refer to fatalities, permanent disabilities or time lost from work.
Lost time injury frequency refers to the number of lost time injuries over a rolling 12-month period,
per 200,000 hours worked.
TRC (Total recordable cases) and TRCF (Total recordable case frequency)
Total recordable cases refer to lost time injuries, medical treatment and restricted work cases.
Total recordable case frequency refers to the number of recordable injuries over a rolling 12-month
period, per 200,000 hours worked.
Tier 1 Process Safety Event (API 754)
A tier 1 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including
non-toxic and non-flammable, from a process which results in one or more of the following: A LTI
and/or fatality; a fire or explosion resulting in greater than or equal to $25,000 of direct cost to the
company; a release of material greater than the threshold quantities given in Table 1 of API 754 in
any one-hour period; an officially declared community evacuation or community shelter-in-place.
Tier 2 Process Safety Event (API 754)
A tier 2 Process Safety Event (PSE) is an unplanned or uncontrolled release of any material, including
non-toxic and non-flammable, from a process which results in one or more of the following: A
recordable injury; a fire or explosion resulting in greater than or equal to $2,500 of direct cost to the
company; a release of material greater than the threshold quantities given in Table 2 of API 754 in
any one-hour period.
Operational availability
Operational availability is the percent of time available for manufacturing after subtracting
maintenance and regulatory/process downtimes.
Refining throughput
Refining throughput is the volume of feedstock intake, comprising crude oil, residues, natural gas
and blendstock, measured in barrels. One barrel equates to approximately 159 litres.

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Gross Refining Margin (excluding Fee Floor/Margin Cap)
The Gross Refining Margin is calculated in USD as the difference between the value of products and
the cost of feedstock for each refining customer. The value of products use Singapore quoted prices
adjusted for New Zealand quality and the cost of importing those products to New Zealand.
Feedstocks are valued using the notional market values adjusted for the cost of getting the
feedstock to the refinery. The Gross Refining Margin incorporates the cost of hydrocarbon used as
fuel and incurred as process losses.
Typically, Refining NZ has an uplift over the Singapore complex margins of around USD 3.00 to 4.00
per barrel. The value of the uplift varies due to fluctuations in freight rates, product quality
premium, crude market premium and operational performance. Product quality premium are the
cost differentials between products made to New Zealand quality and products made to the quality
that applies to quoted prices in Singapore. Crude market premium are the cost differences between
the crude types actually processed at Refining NZ and Dubai (used as basis for the Singapore
complex margins). Refining NZ’s crude diet comprises of crudes that price off Dubai as well as crudes
that price off different markers such as Brent. The fluctuations of these price markers relative to
each other impact the uplift.
Margin Cap/Fee Floor Adjustment
The processing agreements with our customers contain both Floor and Margin Cap clauses, both
effective over a full calendar year.
The Fee Floor is the minimum Processing Fee due, for a calendar year, up to a current maximum of
NZD 137.5 million. If the year-to-date Processing Fee is below the pro-rata Fee Floor, then an
interim pro-rata Fee Floor payment is made by the Customers. Should the Processing Fee exceed
the Fee Floor in future months any pro-rata Fee Floor payments that have been made are repaid to
the Customers.
The Margin Cap limits the Gross Refining Margin for each customer to a maximum of USD 9.00 per
barrel over the calendar year. Should the Gross Refining Margin fall below the Cap in future months
any pro-rata Cap reductions that have been made are repaid by the Customers.
The Cap and the Floor are subject to year-to-date adjustments.
Any balance remaining at the end of the year cannot be carried over to the next year.
Processing Fee (after Fee Floor/Margin Cap)
The Processing Fee is 70% of the Gross Refining Margin after any adjustment for the Margin Cap or
Fee Floor. The Processing Fee is paid by our customers in NZD.
RAP throughput
RAP throughput is the volume of refined products, comprising gasoline, jet fuel and diesel that are
delivered via the Refinery to Auckland Pipeline (RAP) to the Wiri oil terminal.