NZRC yesterday reported average processing margins of $US9.60 per barrel for the May-June period, compared with the record $10.79/bbl for March-April and $6.21/bbl for January-February.

The latest May-June margin compares with $8.78/bbl for the corresponding 2005 period and just $3.27/bbl two years ago.

NZRC has an agreement with its main customers – Shell, BP, Mobil and Caltex – that its margins must be capped at $9/bbl over the year.

The company reported processing fees of $NZ68 million ($A57 million) during May-June but said that would have been $7.2 million higher had the cap not been in place. However, that amount would be recouped if margins dropped in the second half year.

NZRC chief executive Jerome Kerrigan said refining margins had begun to trend down during July-August, with crude and product prices both falling.

He said the global shortage of refining capacity had added to soaring product prices and refiners able to process crude to high standards, such as NZRC, could charge premiums.

But the bubble for product quality was now starting to disappear, according to Kerrigan. Throughput for the May-June period was 6.325 million barrels (MMbbl), compared with 6.89MMbbl a year ago, and total throughput for the six-month period to June was 2.6% below plan due to the timing of a hydrocracker maintenance shutdown.

In August last year, NZRC completed its $180 million Future Fuels project, which is delivering cleaner fuels to New Zealand motorists, and the company is also investigating the feasibility of an $500 million expansion project to increase the refinery’s crude oil intake by about 20%.

The refinery produces more than 70% of the country’s petrol, diesel and aviation fuel needs, and all New Zealand retailers, except Australian-owned Gull, are significant NZRC shareholders, holding in excess of 70% of the company.

NZRC’s shares have more than quadrupled in value over the last three years and were trading at $7.35 this morning.