Departing chief executive Thomas Zengerly told the company’s 2006 annual shareholders’ meeting yesterday that the benefits arising from operating the low-level benzene and sulphur plants from September to March were estimated at $87 million.

New Zealand’s sole refinery was now producing petrol with only 1% benzene, down from 3%, and diesel with only 50 parts per million of sulphur, down from 500ppm. That equated to the removal of 34 tonnes per annum of benzene and 765tpa of sulphur.

Zengerly – who is shifting to Calgary mid-year to become Shell Canada’s oil sands operations vice president – said the new plants would be capable of produce 10-15ppm diesel in the future with only minor modifications.

He said the outlook for the remainder of 2006 and beyond was good, with a planned major hydrocracker shutdown being deferred to 2007, but being replaced by a short-stop “top bed skim” operation.

The $25 million front-end engineering and design (FEED) study into the feasibility of a possible three-year expansion of New Zealand’s sole refinery was also progressing well.

International contractor WorleyParsons – in conjunction with Royal Dutch Shell and United States refining specialist UOP – was doing FEED into the economics of expanding the crude distillation number one unit, replacing the 40-year-old platformer with a larger, state-of-the-art unit, and converting the existing platformer into an isomerisation unit.

A project manager had been recruited and a final investment evaluation was planned for early 2007.

Economic drivers for the Point Forward Project – which if approved would involve about $500-700 million of capital expenditure with scheduled start-up in 2010 – were more profitable growth, reduced dependence on imports of products and components, and increased plant availability.

Zengerly said future challenges included:

· global competition for tight petroleum resources;

· International Energy Agency requirements regarding member countries’ crude oil stocks;

· new New Zealand Government national energy and environmental policies;

· continuing to have a secure electricity supply for the refinery;

· future domestic natural gas supplies;

· possibility of liquefied natural gas imports later this decade.

The big four New Zealand retail oil companies – Shell, BP, Mobil and Caltex – own a majority stake in the NZX-listed refinery, which refines more than 35 million tonnes of petroleum product each year – supplying about 90% of New Zealand’s diesel needs and about 60% of petrol requirements. The rest is imported, primarily from Australia and, to a lesser extent, Singapore.