'All go' for $365m Marsden Pt expansion

A $365 million expansion project at the Marsden Point refinery in Northland, its third major upgrade in a decade, will see the creation of around 300 new jobs.

The project has just been approved by the board and is expected to see a rise of $60 million in operating profits and a strong increase in dividends when it is completed in 2015.

Refining New Zealand announced yesterday that the year’s profits fell by 40% to $34.5 million, as margins fell away at the end of the year and profits were knocked by a strong New Zealand dollar.

Yesterday also saw its shares ending up 1 cent at $2.89. Compared to the previous year, it will pay a final dividend of 9 cents a share despite the fall in profits.

Once its growth project has been completed, dividends will most likely be “40% north of where they would have been otherwise,” said chief executive Ken Rivers, although dividends may see a slight dip during the construction phase.

Mr Rivers also said the project was expected to lift operating earnings by about $60 million a year and pay back its cost within a window of four years.

It would lift gasoline production by about 2 million barrels a year, bringing the market share from 50% to around 65%, further polishing the company’s competitiveness with imports.

The refinery’s growth plan follows around $200 million spent on one expansion in 2005, with another $190 million in the 2009 Point Forward project.

Employment of up to 300 workers would be seen in the new project at its construction peak, with double that amount of jobs outside of the site being created including jobs among suppliers.

“It will be a boost for New Zealand – a fresh bit of capital coming in,” Rivers said.

The company said operating earnings were $132.2 million for the year-end of December, down from $156.7 million in the previous year, a drop of 15%.

Rivers said refinery margins remained relatively healthy at an average US$6.11 (NZ$7.28) a barrel in the past financial year, compared with US$6.17 the previous year. The fall in overall profit however, which is down 40%, partly reflected a drop in intake of crude oil, down from 41 million barrels to 39 million in the year just ended.