Refining NZ Operational Update for September/October 2019

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22 November 2019

Refining NZ Operational Update for September/October 2019













COMMENTARY
Refining - Margins and throughput
The refinery achieved throughput of 7.25 million barrels due to good utilisation by our customers and high
operational availability of 98.6%. This throughput, coupled with a GRM of USD 6.16 per barrel, has earned
the Company NZD 49.3 million Processing Fee revenue in the September/October period.
Global refining margins
Global refining margins rose in September supported by the attack on the Saudi Arabian oil facilities, firm
Asian demand and subdued Chinese exports. However, margins weakened in October as a result of the
significant decline in high sulphur fuel oil prices ahead of the IMO MARPOL 2020 and rising crude freight
rates (see below).
Singapore gasoline margins remained healthy throughout the period. Diesel margins were flat but are still
forecast by leading international energy consulting companies to increase significantly when marine gasoil
demand picks up by year-end (or slightly later) when ships start switching to MARPOL compliant fuels and
MARPOL compliant fuel oil inventory is drawn down as expected.

HIGHLIGHTS
• The Company earned NZD 49.3 million in Processing Fees for September/October. Year to date
Processing Fee income is NZD 222.8 million versus NZD 209.5 million for the same period in 2018.
• Refinery throughput was 7.25 million barrels which was achieved due to good utilisation by our
customers and high refinery availability.
• Refining NZ’s Gross Refining Margin (GRM) was USD 6.16 per barrel which represents a lower than
normal uplift over the Singapore Dubai complex margin.
• Global refining margins were mixed in September/October. They were initially supported by the
attack on the Saudi Arabian oil facilities and firm Asian demand but were then negatively
impacted by the fall in fuel oil cracks without the expected rise in diesel cracks.
• The RAP achieved throughput of 3.4 million barrels earning income of NZD 6.1 million, 5% higher
than the same period last year. Operational availability on the pipeline was high except for a
planned short statutory inspection.
• Process and personal safety performance remained excellent:
o No Tier 1 or Tier 2 process safety events in the September/October period; and
o The lost time injury frequency is currently 0.14 per 200,000 work hours

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Uplift over Singapore Dubai complex margin
Refining NZ’s September/October uplift over the Singapore Dubai complex margin was USD 2.61 per barrel,
lower than normal, due to the impact of low fuel oil margins, flat diesel margins and the building of residue
stocks ahead of the 2020 planned turnaround. The Singapore Dubai complex margin for the
September/October period was USD 3.55 per barrel.
Exchange rate
The average exchange rate for the September/October period was USD/NZD 0.63.
Looking forward - Impact of temporary spike in crude freight rates
As noted above, crude freight rates increased significantly during October and through to mid-November
due largely to the US imposed sanctions on several Chinese tanker companies, including COSCO which owns
~6% of the global VLCC fleet. The sanctions came at a time when the available shipping fleet was already
reduced with a number of vessels docked for installation of exhaust scrubbers and some being used to store
MARPOL compliant fuel oil ahead of January 2020.
While there was a surge in all crude oil tanker rates, product tanker rates only increased moderately.
Aframax tanker rates, which impact Refining NZ’s GRM, increased two and a half fold but product tanker
rates only increased by fifty percent. COSCO has since received a temporary waiver from US sanctions and,
as at mid-November, freight rates had largely recovered with respect to the impact on Refining NZ’s GRM.
Nevertheless, the higher freight rates are estimated to impact the cost of crude processed by Refining NZ
during November and December in the order of USD -1.00 per barrel as the Refining NZ GRM has a
two-month lag in the freight rates that are applied.
Distribution – Refinery to Auckland Pipeline (RAP)
The RAP achieved throughput of 3.4 million barrels of gasoline, jet fuel and diesel which earned income of
NZD 6.1 million, 5% higher than the same period last year. Operational availability on the pipeline was high
except for a planned short statutory inspection which was completed successfully.
The volume of product delivered through the pipeline remained strong and the increased RAP operating
pressure delivered greater flow rates as expected. Refining NZ completed piping tie-ins as part of a project
to install additional pumping capacity for the RAP which will further enhance the resilience of supply to
Auckland.
Natural gas
Natural gas supplies remained at normal levels in in September/October and Refining NZ was able to obtain
all its gas supply requirements at prices around 20% lower than the May/June period peak.
Health, safety and environment
Our excellent process safety performance continued with no Tier 1 or Tier 2 process safety events in the
September/October period. Lost time injury frequency is currently 0.14 per 200,000 work hours. The
continued improvement in safety performance is supported through the 7,500 proactive safety observations
staff and contractors have logged through our hauora korero (safe talks) and hauora hikoi (safe walks)
programs.
Costs
Overall operating costs have been tightly controlled with the ongoing pressure from higher electricity prices.

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OPERATIONAL DATA

Sep/Oct
Sep/Oct
YTD
FY
2019
2018
2019
2018
Health, Safety & Environment
LTI
#
0
1
1
5
LTIF
#/200,000hrs
-
-
0.14
0.48
TRC
#
1
1
2
8
TRCF
#/200,000hrs
-
-
0.41
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
1
1
5
Refining
Brent Crude Oil Price
US$/bbl
61.25
80.0
77.13
71.2
Exchange Rate
US$/NZ$
0.63
0.66
0.66
0.69
Operational availability
%
98.6
97.4
99.7
90.7
Unplanned process downtime
%
1.04
2.5
1.27
0.8
Refining throughput
Mbbl
7.25
7.64
35.88
40.44
Gross Refining Margin
US$/bbl
6.16
7.09
5.85
6.31
Gross Refining Margin
US$M
44.6
54.2
210.1
255.0
(excluding Fee Floor/Margin Cap)
Processing Fee (after Fee Floor/Margin Cap)
US$M
31.2
37.9
147.1
178.6
Processing fee (after Fee Floor/Margin Cap)
NZ$M
49.3
57.8
222.8
258.7
Distribution
RAP throughput
Mbbl
3.36
3.4
17.0
21


Notes:
1. The information provided in this announcement excludes revenue from 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

2015
2016
2017
2018
2019
Ja n/Fe b
Ba rre l s 000's
7,056
6,826
7,160
7,011
6,963
RNZ USD GRM pe r ba rre l
1)
9.91
7.96
6.58
7.54
4.88
Si nga pore Duba i Compl e x GRM
5.40
4.95
3.42
3.37
-0.32
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.51
3.01
3.16
4.17
5.20
NZD Proce s s i ng Fe e (mi l l i on)
2)
59.6
57.0
45.9
50.8
34.9
Ma r/Apr
Ba rre l s 000's
7,411
7,471
5,140
6,958
7,312
RNZ USD GRM pe r ba rre l
1)
8.77
1.84
9.35
6.82
6.63
Si nga pore Duba i Compl e x GRM
4.82
3.18
3.02
3.75
0.75
Upl i ft vs . Si nga pore Duba i Compl e x
3)
3.95
-1.34
6.33
3.07
5.88
NZD Proce s s i ng Fe e (mi l l i on)
2)
62.3
14.8
48.1
45.8
50.1
Ma y/Jun
Ba rre l s 000's
6,416
6,837
7,755
3,910
6,945
RNZ USD GRM pe r ba rre l
1)
8.55
6.26
7.63
0.18
4.36
Si nga pore Duba i Compl e x GRM
4.24
2.13
2.90
2.02
0.17
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.31
4.13
4.73
-1.84
4.19
NZD Proce s s i ng Fe e (mi l l i on)
2); 5)
48.9
43.3
58.4
0.7
32.2
Jul /Aug
Ba rre l s 000's
7,519
6,833
7,511
7,615
7,419
RNZ USD GRM pe r ba rre l
1)
7.66
6.20
8.87
6.86
7.10
Si nga pore Duba i Compl e x GRM
2.52
1.86
4.70
2.57
3.23
Upl i ft vs . Si nga pore Duba i Compl e x
3)
5.14
4.34
4.17
4.29
3.87
NZD Proce s s i ng Fe e (mi l l i on)
2)
63.5
41.3
63.6
54.3
56.2
Se pt/Oct
Ba rre l s 000's
7,221
7,251
6,816
7,639
7,245
RNZ USD GRM pe r ba rre l
1)
9.47
7.49
9.31
7.09
6.16
Si nga pore Duba i Compl e x GRM
5.12
3.18
4.73
2.47
3.55
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.35
4.31
4.58
4.62
2.61
NZD Proce s s i ng Fe e (mi l l i on)
2)
71.8
52.5
62.2
57.8
49.3
Nov/De c
Ba rre l s 000's
7,017
7,447
7,342
7,307
RNZ USD GRM pe r ba rre l
1)
10.82
9.20
6.83
6.53
Si nga pore Duba i Compl e x GRM
6.37
4.19
3.67
1.80
Upl i ft vs . Si nga pore Duba i Compl e x
3)
4.45
5.01
3.16
4.73
NZD Proce s s i ng Fe e (mi l l i on)
2)
73.0
67.6
50.7
49.2
Total
Barrels 000's
42,639
42,665
41,724
40,440
35,885
USD GRM per barrel
1)
9.20
6.47
8.02
6.31
5.85
NZD Processing Fee (million)
2)
379.2
276.6
328.9
258.7
222.8
YTD Cap adjustment
14.4
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.
Unplanned process downtime
A unit downtime is “planned” if the refinery is aware of and has scheduled that unit outage in the
previous year. Unplanned process downtime is the weighted average of unplanned downtime
across all process units.
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.