WHANGAREI REFINERY II NEW INDUSTRY HAS WIDE N.Z. AND OVERSEAS OWNERSHIP

Press, Volume CIII, Issue 30454, 30 May 1964, Page 12

WHANGAREI REFINERY II NEW INDUSTRY HAS WIDE N.Z. AND OVERSEAS OWNERSHIP

(By R. H. LAUNDIR) When the then Prime Minister, Mr Nash, announced in May, 1959, that an oil refinery would be built in New Zealand, he said this was the result of negotiations between the Government and the Shell group, which would construct and operate the refinery. Of the capital of £2O million, 40 per cent would be owned by New Zealand investors, and 60 per cent by the Shell group.

“The Press” objected at the time to the monopolistic nature of this arrangement; and companies marketing oil in New Zealand made their opinions known to the Government. Eventually, instead of being held by a single company, the oil companies’ share of the capital was split up among the marketing companies in proportions roughly equivalent to their share in the New Zealand market.

Ownership is divided among local marketers and investors in the following proportion: Mobil .... 19.2 per cent Shell .... 17.1 per cent B.P 15.1 per cent Caltex ... 8.6 per cent Europa .. 8.6 per cent Local investors 31.4 per cent The holdings of Europa and local investors together make the 40 per cent New Zealand share of ownership originally arranged. A Separate Entity Though the marketing companies have large shareholdings, the New Zealand Refining Company, Ltd., will operate as a separate entity. The refinery company classifies the marketing companies as “participants” and “users.” At no stage does the refinery own the oil it receives and processes. Each participant sends its own crude oil to the refinery and has it converted into its own products which, as a user, it takes over at the jetty, which incidentally, will berth about 180 tankers a year. The installation includes an elaborate blending system to satisfy the individual requirements of the users. The refinery derives its income from a refining fee which represents broadly the difference between the value of the products manufactured and the value of the feedstock required to manufacture them. These values are related to world posted prices for crude oil and finished products, together with appropriate freights and insurance. The posted prices are the publicly-announced prices prevailing from time to time and reported regularly by a trade service which publishes selling prices for petroleum products all over the world. Tanker Pool The distribution from the refinery has been planned on a basis of using foreign-flag ships, available tankers belonging to the user companies, being pooled. Tankers will continue to bring to New Zealand the 10 per cent of New Zealand’s oil requirements that are outside the refinery’s present range of products. These tankers would be retained for perhaps two or three months on the New Zealand coast making deliveries of “white” oils before return-

ing to their normal work. In the same way, some of the tankers bringing crude oil for refining would spend some time delivering heavy fuels round the New Zealand coast. Fitting New Zealand's coastal service into the elaborate programming of hosts of tankers of several companies will, it is calculated, hold distribution costs at the lowest possible level. It is believed that, by keeping ships fully employed, distribution costs on the New Zealand coast will be kept fully competitive with the world-wide international tanker tonnage freight rates. Some trade-union advocacy of tankers on the New Zealand register has been heard. Refinery officers emphasise that they are concerned only with the economics, and not the politics, of this question. They gave the writer statistics showing that at present there would be no more than 80 per cent employment for two “general-purpose” tankers (averaging 18.000 tons deadweight) carrying white oils, and about half-time employment for a black-oil ship. As tanker charter rates are about £650 a day, two tankers swinging at anchor for one day in five and another for every second day would clearly be a very expensive idleness. Building tankers for the New Zealand trade is uneconomic because small tankers are proportionately much more costly than larger ones. Avoiding Nuisances By no stretch of imagination could an oil refinery be called a beautiful sight. Many persons travelling north from Auckland, as they catch a first glimpse of the refinery’s tanks and towers from the road just north of Waipu, may deplore this intrusion on a stretch of magnificent coast. Those responsible for the refinery can do nothing about its place in the landscape; but they can do and are doing, much to avoid or mitigate any nuisance in the way of smoke, smell, or pollution of waters. Refineries of an older type used salt water for cooling, pumping some 6000 tons of salt water an hour. From so large a volume of water a small contamination in the refinery could grow to an unpleasant deposit on the

shore. Mainly to keep the beaches clean, the Whangarei refinery is not using any water from the bay. Fresh water from the Pohuenui river, eight and a half miles away, is pumped in for steamraising. Instead of being cooled by salt water, products will be air-cooled by great propellers pushing air across pipes through which the products pass. Water formed by condensation, from washing, from the fire system, or rain, will pass through speciallydesigned units which will separate out the spillage oil and ensure a clean discharge to the sea. Tankers will be encouraged not to deballast at sea but to bring ballast to two specially-allocated tanks near the jetty. Refinery Sites New Zealand enters now the very long list of countries possessing oil refineries. The list has lengthened, of course, as a result of the oil industry's post-war policy of siting refineries in consuming areas instead of close to the fields that supply them. The modern trend is for medium-size refineries: Whangarei, with a crude oil capacity of 2.7 million metric tons, is of this order. Seeing Whangarei in perspective, we are able to glimpse the magnitude of the international oil industry. At the beginning of the year the Whangarei refinery costing £lO million was merely one of 84 projects for new refineries and 36 major extension projects, the former with a planned total capacity of 155 million tons, the latter 67 million tons. The free world’s total refining capacity now amounts to rather more than 1250 million tons a year (including 700 million tons outside North America); and it will be raised to close on 1500 million tons within about three years. However, neither the present nor the prospective capacity is excessive considering that the free world’s production totalled 1077 million tons in 1963 and is now rising each year by 70 million tons or more. Thus, It is a broad and fast-moving stream into which New Zealand is carried as its Whangarei refinery comes “on stream,” as the technical term has it.