NZ Refining hydrocracker leak to cut profit by up to $7m

NZ Refining said last week that the shutdown would cost $25 million to $30 million more than the $85 million it previously forecast. Photo: Getty Images

New Zealand Refining's hydrocracker shutdown will cost it between $5 million and $7 million, with the machinery out of service until the middle of next week.

A hydrocracker uses hydrogen to break down heavy oil fractions, recovered from crude oil, to produce petrol, kerosene - used as jet fuel - and diesel. NZ Refining is New Zealand's only oil refinery, and describes its hydrocracker as "the heart of the refinery."

The Whangarei-based company said the unit was shut down earlier this week after a newly installed valve failed, lengthening delays from its scheduled refinery maintenance shutdown. Today, it said the leak would have a net profit impact of between $5 million and $7 million, and it expects the hydrocracker to produce on-specification fuels by the middle of next week.

The refinery-wide shutdown was planned to run in stages from April 20 to June 8, and NZ Refining was to spend $85 million on it with a predicted financial impact of $30 million, but the restart was delayed due to maintenance issues and minor leaks. Last Friday, the company said there had been a delay with the hydrocracker due to two minor leaks and its team was assessing when the unit would be restarted. The latest leak was unrelated to those earlier leaks.

NZ Refining also said last week that the shutdown would cost $25 million to $30 million more than the $85 million it previously forecast, implying a cost of $110 million-to-$125 million, and will cut $40 million from profit in calendar 2018 as opposed to $30 million previously flagged.

The company's shares last traded at $2.49, and have fallen 6.8 percent this year.