ANNUAL REPORT 2004

T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Corporate Directory Financial Calendar

Registered Office: Chairman: Annual General Meeting:
Marsden Point Road, I.F. Farrant Thursday 28 April 2005 at 2:00pm
Ruakaka. Directors: Crowne Plaza Hotel
Mailing Address: W.R. Bussing Christchurch.
Private Bag 9024, P.C.A. Colman Proxies Lodged:
Whangarei. G.A. Cumming By Tuesday 26 April 2005 at 2.00pm.
Telephone 09 4328311 P.W. Griffiths Dividend Payable:
Facsimile 09 4328035 G.W. Henson 2004 Final: 30 March 2005
Website: D.A. Jackson 2005 Interim: September 2005
www.nzrc.co.nz P. Logan Share Transfer Register:
Share Registrar: Sir Colin Maiden Closes 5.00pm 22 March and
Computershare Registry Services M.R. Malpass reopens 23 March 2005
Private Bag 92119 C.M. Midgley 2005 Results Announced:
Auckland 1020 Chief Executive Officer: Half Year: 25 August 2005
Bankers: Dr T. Zengerly Annual: 23 February 2006
Bank of New Zealand Company Secretary:
The National Bank of New Zealand Limited D.B. Martin
Legal Advisors:
MinterEllisonRuddWatts
Auditor:
PricewaterhouseCoopers

Cover: Unloading of preassembled piperacks for the Future Fuels Project.

 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Contents Company Profile

Corporate Directory The New Zealand Refining Company is New Zealand’s only refiner of oil
and Financial Calendar IFC products. Four oil companies – BP, Caltex, Mobil and Shell are significant
shareholders and customers.
Company Profile
and Mission Statement 1 All the crude oils and feedstocks that are refined into products at Marsden
Point are owned by customers and the Refinery charges them a processing
Chairman's Review 2
fee. Because of the configuration of the Refinery, it is able to deal with a
CEO's Review 4 wide range of crude oil types imported from all over the world.
Report of the Directors 7 Although originally built in the early sixties, a major expansion and
Directors’ Profiles 9 upgrade of the original refining plant in the mid eighties has resulted in a
relatively modern refinery. The continual upgrading of plant and
Directors’ Interests 10 preventative maintenance ensures world class reliability and efficiency.
Governance 11 The history of the Company until 1990 is covered comprehensively in
Mike Paterson’s book – “The Point at Issue”.
Environmental Performance 13
The Refinery to Auckland pipeline, which was built and commissioned
Social Performance 21
during the refinery expansion, is a key asset not only for the Company but
Future Fuels Project 35 the country as a whole. The single pipe carries diesel, petrol and jet fuel in
controlled batches under farmland, towns and part of the Manukau
Economic Performance 37
harbour to the Wiri Terminal in South Auckland. About half of the
40 Years On... 60 Refinery’s production is distributed in this manner, the balance being
transported by coastal tanker and road to the rest of New Zealand.

In 1999, the laboratory, which had been part of the Refinery since its
beginnings, was set up as a separate company – Independent Petroleum
Laboratory Ltd, so that it could cater for the needs of customers other than
the Refinery. NZRC retains 75% shareholding in this company and BP Oil
NZ Ltd the other 25%.
Mission Having passed its fortieth year of production, the Refinery is now nearing

Statement the completion of a project involving the installation of new plant which
will allow it to produce cleaner fuels for future generations.

The Refinery’s commitment to environmental protection is evident.

“To be the Leading
Supplier of Oil Products
for New Zealand”.
Beautiful sandy beaches surround the north and east of the Refinery.
Together with its neighbours and other stakeholders the Refinery and its
employees continue to focus on protecting this unique environment.
The New Zealand Refining Company is a company with high standards. It
is accredited with ISO 9001 and ISO 14001. The Company continues to
make a considerable contribution to its four customers, its shareholders
(approximately 2300), its staff of over 300 and the local community.

Share of New Zealand’s Fuel Supply in 2004 %

Petrol 69.5
Jet Fuel and Kerosene 76.2
Automotive and Marine Diesel 72.0
Fuel Oil 100.0
Road Bitumen 78.6
TOTAL 74.0
In addition to fuel products, NZRC also produces sulphur for fertiliser
production and carbon dioxide for use in the beverage industry. 1
 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Chairman’s Review
2004 has been an extraordinary year for The New Zealand Refining Company.
The fortunes of NZRC are determined by external factors, such as the
international oil market and the exchange rate, and by internal operational
factors which influence the availability and the optimal operation of the plant.
For the year ended 2004 the Company delivered an all time record result
($97.6 million compared to $37.0 million in 2003). This is a reflection of strong
market conditions and a tribute to the efforts of staff to realise the potential
offered by the market.

The international oil market has continued to be volatile in the last year. Crude
prices fluctuated between 30 and 55 USD/bbl. The Singapore refinery margin
went up and down like a rollercoaster ranging between 0.5 and 6.2 USD/bbl
resulting in an average of 2.9 USD/bbl for the year. This was 1.9 USD/bbl higher
than in 2003.

The main factors behind these swings were supply disruptions caused by war,
Ian Farrant sabotage, industrial action and political events. In addition there was a
significant increase in the world’s demand for oil caused by economic growth,
particularly in countries like China, India and Russia. What we have witnessed
in 2004 is probably just the beginning of China and India taking off
economically. Nearly all commodity prices have been pushed up by strong
demand from this part of the world. The degree of change we are seeing in this
region is having a pronounced impact on international markets and this trend is
likely to continue.

The international refining environment was further impacted by new product

specifications coming into force in many countries, driven by higher
environmental concerns. This had a constraining effect on many refineries as
the demand for low sulphur crude oil increased. Refinery throughput was
reduced in many sites and the vulnerability of refineries to operational
problems increased significantly. Several plant outages drove product prices and
margins up further in times when traders were already nervous about product
supply. Experience tells us that markets will adjust to these changes, but they
need time. It will be difficult for management to repeat the outstanding
performance of 2004, but we commence 2005 with cautious optimism.

The US Dollar continued to weaken during 2004 and at this time it is difficult to
see the bottom in the current trend. As long as the US trade deficit is not
effectively addressed and interest rate differentials stay where they are, one
should expect the NZ Dollar to remain strong with its corresponding adverse
2 impact on NZRC’s processing income.
The Energy situation in New Zealand remains challenging for
suppliers and customers. Exploration has been stimulated by
government in the hope that the widening supply gap for natural
gas, following the depletion of the Maui field, can be closed
before 2011. Project Aqua (a hydroelectric power project on the
South Island) has been cancelled, but E3P(a combined cycle
project in Huntly) has been approved and several smaller
generation projects are progressing.
In the direct vicinity of the Refinery, Mighty River Power has
announced a proposal to convert the mothballed Marsden B
power station to a coal fired power station. If this proceeds it may
have an impact on the local air shed and the current and future
operation of the Refinery. The Company will examine the
resource consent application carefully and highlight any risks for
NZRC. Supply and price security for electricity remain a serious
issue for the Company.
In addition to the issue of electricity supply, electricity
transmission and other electricity infrastructure is also of major
concern.
Towards the end of the year it transpired that the country had
not lived up to its IEA (International Energy Agency) obligation
to hold 90 days of oil stocks for emergency situations. The
Government commissioned a study to determine how New
Zealand might rectify the situation to which NZRC has provided
input and comments. Decisions arising from the study may have
a significant impact on the Company if additional product import
facilities and storage are required.
Sanjo Kuindersma, Refining Scheduler updating feedstock scheduling data.
Operating Surplus
(NZ Dollar Millions)
180
150
120
90
60
30
0
1964 1974 1984 1994 2004
The Directors made several strategic decisions
in 2004:
• The Refinery to Auckland pipeline IPS-2 project
was approved. This project includes the
construction of a new pumping station along
the pipeline route and will increase the pipeline
capacity by 20% from the second quarter of
2005.
• In 2003 when NZRC signed the Negotiated
Greenhouse Agreement a commitment was
given to undertake a feasibility study for a
cogeneration plant at Marsden Point. The study
has been completed but a project will not be
progressed given the present uncertainty about
future natural gas supplies.
• Management has also commenced
investigations into increasing refinery
throughput. Preliminary reports are
encouraging and the study will be progressed
further in 2005.
• During the last year the Board spent
considerable time ensuring that the Company’s
Constitution is compliant with the new NZX
(New Zealand Stock Exchange) listing rules. A
Special Meeting of shareholders was held in
October to approve the changes. In accordance
with the new rules, an additional independent
director was appointed to the Board.
Shareholders can be very satisfied with the
performance of the Company share prices in 2004,
which have more than doubled since December
2003. This reflects the excellent operating result for
the year and the improved business outlook for
refiners in general.
In February 2005 the Board resolved to pay a fully
imputed dividend of 200 cents per share in March
2005.
Ian Farrant
Chairman 3
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CEO’s Review
In this year’s report we have continued our journey towards full Sustainable
Reporting by filling in some of the gaps we left in last year’s report where we
reported our performance in terms of environmental, social and economic
dimensions. I am pleased to be able to report significant progress in all of these
areas during 2004.

Environmental Performance
In 2004 we focussed on carefully controlling our sulphur dioxide emissions. We
are able to report that we stayed below our average annual resource consent
allowance and that we used less than half of the allowable high emission
tranche, available during plant upsets. In our opinion this is a creditable
performance.

An area of ongoing concern is the quality of effluent water, in particular the

sulphide and suspended solids content. We installed and commissioned a new
Dr Thomas Zengerly analyser in 2004 which has enabled better monitoring and control and we have
cleaned out the storm water basin. This has resulted in significant progress
towards the end of the year in improving the quality of effluent water to within
target parameters.

We submitted the first annual NGA (Negotiated Greenhouse Agreement) report

to Government confirming that we are firmly on track to achieving world best
practice in our energy efficiency.

We are concerned about the proposal by Mighty River Power to build a new
power station fuelled by coal in the vicinity of the Refinery and will study the
application very carefully and will highlight any risks to our current or future
operation in a submission to the district and regional councils.

Social Performance
Safety remains our number one priority. Our focus on safety reflects our social
responsibility in ensuring the wellbeing of our staff as well as our commitment
to any legal requirements. We also firmly believe in the business benefits of
ensuring a safe site and this is rapidly becoming part of our Company culture.
Everybody on site is encouraged to stop work if they feel their safety is
compromised. Executing work safely does not have to take more time or be
more expensive. We are convinced that good preparation and risk management
make for less expensive and more efficient execution of the tasks at hand. The
safety performance of the Company has again improved in 2004 when
4 compared with 2002 and 2003. The total recordable case frequency, the key
performance indicator to measure our safety performance, has
reached a worldwide best practice level of 1.8 from 3.9 in 2003. Singapore Refining Margin
This milestone was achieved in a year of high activity including a (US Dollars per Barrel)
3.00
major shutdown and the acceleration of the Future Fuels project.
We suffered one lost time injury and a number of incidents with 2.50

high potential for injury demonstrating that we cannot rest on 2.00

the good performance achieved to date. We will continue to
1.50
focus on safety in 2005 and the years beyond.
1.00
Staff turnover has reduced in 2004 to 6% from 15% in 2002 and
0.50
10% in 2003 indicating a growing dedication of staff to continue
to work with the NZRC team. An extensive leadership 0.00
2000 2001 2002 2003 2004
development program has been implemented in 2004 consisting
of workshops, lectures and discussion groups to improve the
quality of our combined leadership at all levels.
Operating Costs
During the year we continued our engagement with the (NZ Dollar Millions)
community surrounding us. An open day was organised marking 110

40 years of operation at Marsden Point. The event proved to be Electricity Costs Inset

overwhelmingly successful. More than 10,000 visitors were 100

counted on the day. Revenues and donations were collected to

support the local hospice. All our social sponsorship activities are 90

targeted at supporting the local community of which the

80
Company is an integral part. In line with our business principles
we do not support any political parties, organisations or
70
individuals. A detailed list of all sponsorship activities can be 2000 2001 2002 2003 2004
found later in the report.

Economic Performance
Exchange Rate
The Company delivered a profit after tax of $97.6 million, $60 (NZ Dollar vs US Dollar)
million higher than in 2003. Looking back in history, this is the 75

highest result ever achieved. It is a reflection of both the excellent 70

operation of the Refinery and an improved business environment 65

for refiners worldwide. In a situation where refining margins 60

55
fluctuate widely over a short period of time, it has proved more
50
important than ever to have the plant running at its full
45
operating capability when it counts. The planned major
40
shutdown in April was completed successfully and the availability
35
of the processing units for the remainder of the year was 2000 2001 2002 2003 2004
excellent despite a short unplanned shutdown of the
Hydrocracker in September.

One of the key deliverables from the 2004 Business Plan was the Pipeline Income
development and implementation of effective engineering and (NZ Dollar Millions)
30
maintenance planning processes across the site. I am pleased to
report that there have been significant improvements in this area
25
and further gains are expected in 2005. We continued to invest in
preventive maintenance programs, like the tank program, the
20
corrosion under insulation project and risk based inspection
($10.8 million in 2004). We also commenced an upgrade to the
15
fire protection and security systems of the Refinery.

Operating costs were tightly controlled and overall were within 10

2000 2001 2002 2003 2004
budget, assisted by electricity costs, which were considerably
lower than in 2003. 5
 Thomas Zengerly and Derek Atkinson inspecting progress at the Future Fuels construction site.
Cash Flow 2004
Pay Roll
Suppliers
Taxes
Interest
Capital Expenditure
Dividend
Growing the Business
Last year the Company’s medium term business plan was updated.
The theme and ambition of the new plan is to turn a “good
company” into a “great company”.
We have made significant progress in a number of growth areas:
• The Future Fuels project continues to track on target. This is a
big challenge for the Company and a separate section of this
report should give you a flavour of how much progress has
been achieved. We are planning to start the new process units
up in the second half of 2005.
• The project of de-bottlenecking the Refinery to Auckland
pipeline has been progressed to a stage where it should come on
stream at the beginning of March 2005 as planned.
• A feasibility study for cogeneration at the Refinery has been
completed. This project has been put on hold until there is
6 certainty of a future supply of natural gas for fuel.
• The Company conducted a screening study to
expand the capacity of the Refinery by
approximately 20%. The resulting reports
29,512
show that the initial concept is feasible and
65,084 attractive. Further resources will be
48,519 committed to developing this project further
in 2005. Implementation of any
2,068
recommendations would be in 2008 at
141,504 earliest.
38,402 • Management has engaged in discussions and
studies with the sponsors of an LNG project.
Results indicate that Marsden Point is a
suitable location for such a project. Future
progress will be dependent on the appetite of
gas consumers for progressing the concept
with attractive conditions for NZRC.
• We have recruited a business development
manager to provide leadership and ensure the
progress of these and other projects.
2004 was a year full of challenges and
opportunities. The Company has delivered an
outstanding result. I want to compliment all staff
and contractors for their excellent performance in
a demanding year.
Thomas Zengerly
Chief Executive Officer and General Manager
 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Report of the Directors

The Directors present their forty-third Annual Report together with the audited
financial statements of the Company for the year ended 31 December 2004.

GROUP PARENT
Income 2004 2003 2004 2003
$000 $000 $000 $000

Operating surplus before Income Tax 151,176 59,581 151,007 59,373

Income Tax 53,563 22,579 53,478 22,579
Minority Interest (66) (55) – –
Operating surplus after tax,
being surplus attributable to Shareholders of the Company 97,547 36,947 97,529 36,794

Operating Activities
The Company continued to refine and process petroleum products. The Company
also operates a product pipeline from its site at Marsden Point (in the vicinity of
Whangarei) to a terminal at Wiri in South Auckland. A subsidiary company,
Independent Petroleum Laboratory Limited, carries out laboratory testing for the
Company and for external customers.

Left to Right: William Bussing, Andrew Clements (alternate for Geoff Cumming), Peter Logan, Mark Malpass,
Sir Colin Maiden, Chris Midgley, Ian Farrant, David Jackson, Peter Colman and Peter Griffiths.
 Report of the Directors continued

Dividends incur no monetary loss as a result of actions undertaken by them

as Directors. Certain actions are specifically excluded, such as the
A fully imputed interim dividend of 100 cents per
incurring of penalties and fines which may be imposed in respect
share amounting to $24,000,000 was paid on
of breaches of the law.
28 September 2004. The Directors resolved to pay
a final dividend of 200 cents per share amounting Directors' Shareholdings
to $48,000,000 to be paid on 30 March 2005. The
final dividend will also be fully imputed. The particulars of Directors' interests in shares are as at the
balance date. No change has occurred since balance date.
Directors The details of the number of shares held by Directors are set out
During the year, Messrs Pronk, Heng, Clark and below. No transactions were made during the financial year, or
Garner resigned. The vacancies created by these since balance date.
resignations were filled by Messrs Jackson, Malpass Director 2004 2003
and Midgley, the appointments being made by the I.F. Farrant 10,000 10,000
Directors under article 9.5 of the Constitution. Sir Colin Maiden 500 500

At the Annual Meeting in April 2005, Messrs Auditors

Griffiths, Henson and Logan will retire by rotation.
Messrs Jackson, Malpass and Midgley will retire PricewaterhouseCoopers, whose remuneration is detailed in
under the provisions of article 9.5. Note 2 to the financial statements, have indicated their
willingness to continue in office.
All Directors being eligible for re-election offer
themselves for re-election at the Annual Meeting. Events Subsequent to Balance Date
Messrs Bussing, Colman, Henson and Midgley are The Directors are not aware of any matter or circumstance since
not resident in New Zealand. the end of the financial year not otherwise dealt with in this
report or the financial statements that has or may significantly
Directors' Interest in Contracts affect the operation of The New Zealand Refining Company
Since the date of the last report, the Directors have Limited, the results of these operations or the state of affairs of
declared, pursuant to section 140(2) of the the Company.
Companies Act 1993, that they are to be regarded
as having an interest in any contract that may be Directors’ Remuneration
made with the entities listed by virtue of their The remuneration and other benefits received by directors during
directorship or membership of those entities. the year were as follows. No fees are paid by Independent
A detailed list of these declarations is included in Petroleum Laboratory Ltd.
this report. Fees 2004 2003
W.R. Bussing 30,000 2,792
Directors' Benefits A.N. Clark 25,000 16,750
P.C.A. Colman 35,000 17,250
No Director of the Company has, since the end of
G.A. Cumming 30,000 16,750
the previous financial year, received or become
I. F. Farrant 189,000 43,000
entitled to receive a benefit (other than a benefit
G.R. Garner III 10,000 –
included in the total emoluments received or due
P.W. Griffiths 35,000 17,750
and receivable by Directors shown in this report).
A.C. Heng 15,000 16,750
No loans have been made to Directors.
G.W. Henson 30,000 16,750
At the Annual Meeting in April 2004, Shareholders D.A. Jackson 5,000 –
approved the removal of Directors Retirement P. Logan 30,000 16,750
Allowances from the Constitution and the payment Sir Colin Maiden 113,750 27,250
of $129,000 to Mr Ian Farrant and $78,750 to Sir M.R. Malpass 5,000 –
Colin Maiden, being amounts payable if they were C.M. Midgley 5,000 –
to retire at that date. These payments were made K.M.A. Pronk 15,000 16,750
during the year. J.H. Wake – 13,958

Directors' Insurance
The Company has arranged Directors' Liability
Insurance which, together with a Deed of
8 Indemnity, ensures that generally Directors will
T H E N E W Z E A L A N D R E F I N I N G
Directors’ Profiles
Ian Farrant B.Com FCA Chairman
Chartered Accountant. A Director of a number of listed
and unlisted public companies.
William Bussing BS, MS (Chem Eng), MBA
Director, Manufacturing & Commercial, BP Refining -
International Joint Ventures. Joined Amoco Oil Company
in Chicago in 1978. Has held positions in refining, finance,
and planning in the USA and Singapore. Current role
includes responsibility for BP’s Refining Joint Ventures
outside of Europe. Director of Shell & BP South African
Petroleum Refineries (Pty) Ltd.
Peter Colman LL.B, FCA
Shell East Zone Oil Products Financial Controller. Joined
Shell in London in 1980. Held positions in finance,
resources and manufacturing in Australia, Norway and
UK. Director of Shell New Zealand Holdings Limited and
Shell Australia Limited.
Geoffrey Cumming BA (Honours), MSc (LSE)
Deputy Chairman of Emerald Capital Limited (NZ) and
Vice Chairman of its Canadian parent, Gardiner Group
Capital Limited. Holds a variety of public and private
directorships in New Zealand and North America including
Chairman of Western Oil Sands Inc, and Director of Opti
Canada Inc, in Canada. Previously, President and CEO of
Gardiner Oil and Gas Limited, a publicly-listed Canadian
petroleum company, and a Governor of the Canadian
Association of Petroleum Producers.
Peter Griffiths BSc (Marine Biology) Honours (Victoria University)
Managing Director, BP Oil NZ Ltd. Joined BP 1988. Held
various management positions in New Zealand and
overseas.
Glenn Henson BE (Chemical), M. Eng Sci.
Manager Refining Australia and NZ for Mobil and Director
Refining Mobil Oil Australia Pty Ltd. Joined Mobil at
Altona Refinery (Melbourne) in 1977. Held positions in
refining, planning and supply with ExxonMobil in USA
and Australia.
Peter Logan BE (Chemical)
General Manager of Refining and Supply, Caltex New
Zealand Limited. Joined Caltex in 1984 and has held
various positions in supply and trading with Caltex in New
Zealand and Singapore.
C O M P A N Y L I M I T E D
David Jackson M.Com FCA
Chartered Accountant. Director of a number of public
companies.
Sir Colin Maiden M.E. (NZ) D.Phil. (Oxon), Hon LLD (Auck)
Director of a number of public companies, including Fisher
& Paykel Healthcare Corporation Ltd and Foodland
Associated Ltd. Chairman of DB Breweries Ltd.
Mark Malpass NZCE (Mech), BE (Hons), MBA
Lead Country & Fuels Manager - Chairman of Mobil Oil
New Zealand Limited and ExxonMobil Chemical New
Zealand Limited. Joined Mobil in 1992 and held various
positions including Australasia planning, New Zealand
sales management roles, and asset/engineering
management positions. Previously worked in
Construction/Engineering industry.
Chris Midgley CEng IChemE
General Manager, Supply and Marine, Shell Oceania.
Joined Shell 1997. Held various management positions in
supply and refinery operations in Europe and spent four
years as Trading Manager for Shell Trading and Shipping
Company. Previously worked seven years with Exxon in
various engineering roles. Director of Trident Shipping
Ltd, Silverfern Shipping Ltd and the Australian Marine Oil
Spill Centre.
IPL Directors
Dennis Martin BCA
Company Secretary and Finance Manager. Joined NZRC
in January 2001 from Billiton and BHP, where he held
several roles in the financial management and treasury
functions.
Rex Passau BE (Chem & Mats) Grad.Dip.Bus. CEng. MIChemE. MIPENZ
Currently Process Services Manager. Joined NZRC in 1990,
has held positions in process technology, production and
HSE. Previously worked in the aluminium industry in
New Zealand and Australia.
Dr Barry Blackett BSc and PhD in chemistry (Univ Canterbury)
Eight years university teaching in UK and Africa. 21 years
with BP Chemicals and BP Oil in a technical role including
14 years in current role as BP New Zealand's Technical
Manager.
9
 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Directors’ Interests
BP Oil New Zealand Limited Mr P.C.A. Colman Alternate Directors
A&B Coal Marketing Company Pty Ltd
Mr P.W. Griffiths A&B Collieries Pty Ltd BP New Zealand Ltd
BP New Zealand Holdings Ltd Advantage Petroleum Pty Ltd
BP New Zealand Share Scheme Ltd Austen & Butta (Holdings) Pty Ltd Mr J.H. Wake
BP Oil New Zealand Ltd Austen & Butta (Operations) Pty Ltd BP Oil New Zealand Ltd
BP Pacific Investments Ltd Austen & Butta (Sales) Pty Ltd Coastal Tankers Ltd
Coro Trading NZ Ltd Austen & Butta (Services) Pty Ltd Penagree Limited
Europa Oil New Zealand Ltd Austen & Butta Drilling Pty Ltd Penagree No.2 Limited
McFall Fuel Ltd Austen & Butta Ltd Silver Fern Shipping Ltd
NZ Diving and Salvage Ltd Derfell Pty Ltd
NZDS Property Ltd Dombarton Colliery Pty Ltd Caltex Oil (NZ) Ltd
Mr W.R. Bussing E&P Carnarvon Ltd
E&P Finance Australia Pty Ltd Mr J.S. Robison
Singapore Refining Company Pte Ltd Alliance Refining Company
E&P Holdings Australia Ltd
Tanker Mooring Services Pte Ltd Pakistan Refinery Limited
E-Fill Pty Ltd
South Africa Petroleum Refineries Pte Ltd Singapore Refining Company
Fuelink Pty Ltd
Harliwich Investments Pty Ltd Private Limited
Caltex New Zealand Ltd Star Petroleum Refining
Nationwide Oil Pty Ltd
Mr P. Logan Oil Fuel Recovery Systems Pty Ltd Company Limited
Caltex New Zealand Ltd Pioneer Road Services Pty Ltd
Programmed Tribology Services Pty Ltd Emerald Capital Ltd
Penagree Limited
Silver Fern Shipping Ltd Programmed Tribology Services
Mr A.J. Clements
Coastal Tankers Ltd (C.Q.) Pty Ltd
Emerald Capital Limited
Penagree No.2 Limited Provident & Pensions Holding Pty Ltd
New Zealand Experience Limited
High Country Salmon Limited SASF Pty Ltd
Rainbows End (1991) Limited
Shell Australia Ltd
Ryman Healthcare Limited
Emerald Capital Ltd Shell Chemicals (Australasia)
Pacific Turbine Pty Limited
Trading Pty Ltd
Mr G.A. Cumming Airwork (NZ) Limited
Shell Information Technology
Capital Aviation Investments Limited
Emerald Capital Limited International WA Pty Ltd
The Walshe Group Limited
Goldpine Group Ltd Southern Coal (Extended) Pty Ltd
Orion Corporation Limited
Zeus Capital Limited Sungold Petroleum Pty Ltd
Navman NZ Limited
Zeus Management Limited The Federal Coke Co Pty Ltd
Jacon Investments Limited
Gardiner Group Capital Limited The Invincible Colliery Pty Ltd
TVD Holdings Limited
Garbell Holdings Limited The Mount Pleasant Agricultural Co Pty
Café Concepts Limited
Western Oil Sands Limited Ltd
OPTI Canada Inc The Shell Company of Australia Ltd
Mobil Oil New Zealand Ltd
Cyries Energy Limited Trifoleum Pty Ltd
GSW Incorporated Shell New Zealand Holding Mr C.W. Erickson
Company Limited Mobil Oil Australia Pty Ltd
Mobil Oil New Zealand Ltd Fulton Hogan Limited Vacuum Oil Company Proprietary Limited
Shell NZ Exploration & Production Mobil Refining Australia Pty Limited
Mr M.R. Malpass Holding B.V.
ExxonMobil Chemical New Zealand Ltd Shell Investments NZ Limited
Mobil Oil New Zealand Ltd
Mr G.W. Henson Independent Directors
Mobil Refining Australia Pty Ltd Mr I.F. Farrant
Mobil Oil Australia Pty Ltd Broadway Industries Ltd
Vacuum Oil Company Pty Ltd PPCS Limited
W.A.G. Pipeline Pty Ltd Westpac Trust New Zealand Advisory
Crib Point Terminal Pty Ltd Board
Shell Australia Ltd Mr D.A. Jackson
Pumpkin Patch Limited
Mr C.M. Midgley CanWest MediaWorks (NZ) Limited
Trident Shipping
AMOSC - Australian Marine Sir Colin Maiden
Oil Spill Centre DB Breweries Ltd and Subsidiaries
Silverfern Shipping Marsh (NZ) Ltd Advisory Group
Fisher & Paykel Healthcare Corporation
Foodland Associated Ltd
Fisher and Paykel Executive Share
Purchase Scheme
10
T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y
Governance
The Directors, with advice and assistance from the Chief
Executive Officer are responsible for the governance of the
Company. Compliance with governance controls and
adherence to business principles is the responsibility of all
employees and other personnel performing activities for
the Company.
NZRC recognises that it has the following key areas of
responsibility:
• To all shareholders
• To customers
• To employees
• To those with whom we do business and
• To our neighbours and society at large.
These five areas are inseparable and require continual
focus at all levels of the organisation. We are continually
making decisions where a balance must be struck,
ensuring that this balance is appropriate for the long term
benefit of all stakeholders.
Our Business Principles cover integrity, economics,
political activities, heath, safety, environment, the
community, competition and communication. Over the
next year a team of employees will be reviewing our
principles, discussing our values and behaviours and
making recommendations to Senior Management and the
Directors on any suggested changes, and any specific
actions that need to be taken to ensure that we have a
comprehensive, aligned and appropriate set of values, with
matching and complementary behaviours. We will then
move forward with a revised code of ethics.
Role of the Board
The Directors are elected by shareholders to oversee the
operations of the Company and to set a strategic direction
that not only protects the shareholders’ existing
investment but further improves the wealth or value of
the Company for them.
The Directors have certain statutory duties they must fulfil
– these include financial reporting, compliance with
competition laws etc, compliance with NZ Stock Exchange
Rules and adherence to the Company’s own Constitution.
In addition they retain control over certain aspects of the
business for governance reasons.
The Board is also responsible for selecting and evaluating
the performance of the Chief Executive. The Board
L I M I T E D
delegates its authority to the Chief Executive so that he
can carry out his obligation of leading and managing the
Company.
Operation of the Board
The Board meets regularly, on a formally agreed schedule,
six times per year and on other occasions, as the need
arises, either directly or by telecommunication. At least
two board meetings are held at the Refinery each year. At
these times Directors engage in safety walks and view
other aspects of the Company’s operations. The Board
receives copies of the Company’s monthly operating
results as well as specific reports written by the Company
or consultants to support Board meeting agenda items.
Two mandatory agenda items are HSE (Health, Safety and
Environment) and Operations. The Chief Executive Officer
(CEO) and the Company Secretary (CFO) attend the
Board meetings.
NZX Best Practice Guidelines
The NZX (NZ Stock Exchange), as part of its Rules requires
the Directors to confirm that its practices and procedures
comply with a series of requirements detailed in Appendix
16 of the Rules. As part of the Board’s compliance and
governance activities the Audit Committee reviews this
aspect and informs the Board as to whether it is complying
or not and whether any specific disclosures need to be
made in the Annual Report. The Board confirms that it
complies with Appendix 16 in all material respects except
for the following matters.
• The Company has Business Principles and Company
Policies that to a large extent cover all of the “Code of
Ethics” requirements of Schedule 16. Over the next
year a Code of Ethics will be developed, assimilating
Principles and Policies.
• The Directors’ remuneration does not include any
element under a “Performance Based Equity Security
Compensation Plan”.
Board Composition
During the year Board composition changed in order to
meet the ratio of Independent Directors required by the
NZX Rules. BP, who for historic reasons had three
representatives on the Board, volunteered to reduce their
representation by one, allowing the appointment of an
additional Independent Director. 11
 Governance continued Substantial shareholders who desire
Board representation do this through
the usual director nominating
procedures. There are no provisions
in the Constitution regarding
shareholder representation. There is
no requirement for a Director to hold
shares in the Company.

The Directors are very conscious of

the need to have a Board
composition which has a balance of
both technical and business, national
and international experience.

Audit Committee.
The NZRC Board Audit Committee
has been in place for a considerable
number of years. Its role has
expanded as corporate governance
has been codified and assumed
greater focus. The Committee
operates under a formally approved
Charter from the Board. The Charter
Peter Colman (Director), Margaret Pennington (Accounting Manager), Lisa Parkes (Company Auditor) and
David Jackson (Director) at an Audit Committee Meeting. meets all of the requirements of the
NZX Rules. The Committee is
comprised of Sir Colin Maiden, Mr
Directors’ Attendance at Board Meetings 2004
Peter Colman and Mr David Jackson.
Feb Apr Apr Apr Jun Aug Oct Dec Total
Sir Colin and Mr Jackson are
I.F. Farrant ¸ ˚ ¸ ¸ ¸ ¸ ¸ ¸ 7
Independent Directors. Mr Colman
Sir Colin Maiden ¸ ¸ ¸ ¸ ¸ ˚ ¸ ¸ 7
and Mr Jackson both have formal
G.A. Cumming ˚ ˚ ˚ ¸ ˚ ¸ ¸ ¸ 4
qualifications which meet the
P. Logan ¸ ¸ ¸ ¸ ¸ ¸ ¸ ¸ 8 accounting or financial background
J.H. Wake ¸A • • ¸A • ¸A ¸A • 4 requirement of the NZX Rules. Sir
W.R. Bussing ¸ ¸ ¸ ¸ ¸ ˚ ˚ ¸ 6 Colin, who has a wealth of
P.W. Griffiths ¸ ¸ ¸ ¸ ¸ ¸ ¸ ¸ 8 experience as a Director and member
A.N. Clark ˚ ¸ ˚ ˚ ¸ ¸ • • 3 of audit committees, would also be
P.C.A. Colman ˚ ¸ ¸ ¸ ¸ ¸ ¸ ¸ 7 deemed by the Board to have a
K. Pronk ˚ ˚ ˚ ˚ ˚ ˚ • • 0 suitable background that meets the
G.W. Henson ¸ ¸ ˚ ¸ ¸ ¸ ¸ ¸ 7 NZX requirement.
A.C. Heng ˚ ¸ ¸ ¸ ˚ • • • 3
A.J. Clements ¸A ¸A ¸A • ¸A • • • 4
Directors’ Nominations and
Remuneration Committee
G. Garner • • • • ¸A ¸ • • 2
M.R. Malpass • • • • • • • ¸ 1 This committee was formed in
C.M. Midgley • • • • • • • ¸ 1 February 2004. The first task of the
D.A. Jackson • • • • • • • ˚ 0 committee was to develop a Charter.
“Best Practice” examples from
various sources were used to mould
Directors’ Attendance at Audit Committee Meetings 2004
this document, recognising New
Feb Aug Total
Zealand requirements, the size of the
Sir Colin Maiden ¸ ¸ 2
Company and our Constitution. The
P.W. Griffiths ¸ • 1
Charter was formally approved by
P.C.A. Colman ¸ ¸ 2
the Board. The Committee was active
I.F. Farrant ˚ ¸ 1 during the year, with the
12 ¸ = Attended ¸A = Attended as an Alternate ˚ = Did not attend • = Not a Director at that time appointment of three new Directors.
T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Environmental
Performance
2004 continued to be a year of environmental
challenges for NZRC. Many of the challenges were
similar to those faced in 2003, some from within the
confines of the Refinery, and others outside of the
Company’s operational control.
 Environmental Performance continued
Local Issues
Following electricity shortages in the winter of 2003, Mighty
River Power considered commissioning the mothballed and never
used Marsden B Power Station located at Ruakaka. At that time,
it was intended that fuel oil would fire the station.
However, Mighty River Power subsequently reconsidered the fuel
type, and in late 2004 applied to both the Whangarei District and
Northland Regional Councils for a range of resource consents to
both support and operate a coal fired power station. Consents
sought also included ancillary services for coal supply and ash
disposal. The revised proposal now includes technology to reduce
sulphur dioxide and particulate emissions to air from Marsden B.
NZRC has a strong interest in the balance between the certainty
of electricity supply for its own operations, the cost of electricity,
and any ramifications that a new discharger in the air shed may
have on its future consent emission limits. At the time of writing
this report, NZRC is assessing the information contained within
the resource consent applications to determine what course of
action to take, if any.
Also in 2003, Marsden Cove Ltd applied for resource consents to
establish a residential-marina development in close proximity to
the Refinery. This significant proposal included 700 residential
allotments and 250 berths as well as commercial facilities.
NZRC opposed this development on the grounds that the
introduction of such land-use activities, in close proximity to an
already well established and properly authorised heavy industry,
could significantly constrain the Refinery’s legitimate operations
through a “reverse sensitivity” effect. After appealing to the
environment court, NZRC reached a settlement with Marsden
Cove Ltd that minimises the potential effects that the proposed
development may have on the Refinery’s current operations.
Hazardous Substances warning notice at entrance to the Refinery.
14
Environmental Systems and Standards
In order to assist in avoiding, remedying, or
mitigating environmental effects from our
operations, NZRC operates an Environmental
Management System (EMS) to the ISO14001
standard. The Company has held this certification
since April 2002 and we now consider it a core
component of our business management strategy.
Following external audit, we have continued to
retain certification.
As part of the EMS improvement plan, the
Company has continued to implement the
Hazardous Substances and New Organisms Act
(HSNO). Compliance with the Act was evidenced
when the Company obtained a Location Test
Certificate in December 2004. The Location Test
Certificate covered areas of hazardous substance
management such as: approved handlers,
emergency management, hazardous atmosphere
zone controls, incompatible substance segregation,
protective equipment and clothing, signage, and
secondary containment. NZRC will continue to
work towards compliance as further HSNO controls
take effect during the implementation process.
Greenhouse Gases
In 2003, the Company entered into the first
Negotiated Greenhouse Agreement (NGA) with the
New Zealand Government. Negotiated Greenhouse
Agreements are one of the methods under which
the Government intends to meet its obligations
under the Kyoto Protocol. As part of the NGA,
NZRC has an obligation to achieve “Best Practice”
in energy efficiency. A core component of
monitoring NGA compliance is the independent
assessment of our energy efficiency by Solomon
Associates, a company with worldwide experience
in refinery benchmarking.
By achieving “Best Practice”, we will reduce the
amount of greenhouse gas emissions per unit of
product produced. This year we undertook several
projects and strategies as part of the pathway
towards “Best Practice”.
One such project investigated by the Company
(assisted by HRL, an Australian based organisation
that has expertise in solid fuel energy and co-
generation) involved a study based on an eighty
megawatt co-generation facility using refinery gas,
imported natural gas and wood waste as fuel.
 Environmental Technician, Peter McCartain operates a sound monitoring device on the jetty.
The project was submitted to the Climate Change
Office of the NZ Government under the “Projects to
Reduce Emissions” Tender and was allotted a
significant proportion of available carbon credits.
The companies have worked together to further
refine the project and to prepare draft resource
consent applications. However, due to the inability
to source additional fuel (natural gas) for a period
longer than 5 years, the NZRC Board has decided
to put the project on hold. Regular reviews of fuel
supply and generation economies will be carried
out in the future.
Future Fuels Project
Continued progress on construction of the Future
Fuels Project took place in 2004 with the start-up
of the associated units expected in the third quarter
of 2005. This project will allow the Refinery’s
products to meet new fuel specifications aimed at
reducing the discharge of contaminants such as
benzene and sulphur dioxide from the eventual
combustion of fuels. Benzene is a known
carcinogen and sulphur dioxide can cause adverse
respiratory effects in humans. The reduction of
these contaminants will reduce the risk of these
effects occurring. Furthermore, new generations
of vehicles will be supplied with modern fuels,
contributing to lower vehicle emissions.
Shipping and Oil Spill Exercises
In contrast to 2003, there were no incidents of crude tankers
touching the bottom while entering Whangarei Harbour during
2004. Actions taken by the appropriate parties to date appear to
have been successful. These actions included changes to vessel
entry procedures and the installation of a wave rider buoy to give
real time information on sea conditions (swell direction, height
and interval) so that better entry decisions are made.
Because the Refinery is the eventual destination of these vessels,
a common misconception is that NZRC is responsible for vessels
and their cargoes.
While the Company has a strong desire to prevent these incidents
from occurring, no responsibility or liability attaches to NZRC for
these vessels until they are berthed at our facilities.
The Company has always recognised, and is committed to its
responsibilities for areas under its control to prevent and assist in
the cleanup of oil spills.
As part of NZRC’s continuing oil spill readiness response, two oil
spill exercises, “Operation First Time” and “Troil Boom” were
undertaken in collaboration with the Northland Regional
Council, North Tugz, Northport, and Maritime Safety Authority
staff. Each exercise involved the deployment of a different type
of boom which is used to contain and assist in the recovery of oil.
Both exercises were considered successful in terms of training
staff, and retaining familiarisation with equipment under different
weather and sea conditions. The exercises provide an important
practical element in supporting and implementing the joint oil
spill response plan. 15
Environmental Performance continued
Inputs (Materials, Energy, Water)

Crude and Residue Feedstock

(Megatonnes)
5.0

4.9
The following sections include a selection of the environmental
indicators used by the Global Reporting Initiative. The indicators
4.8
include the use of natural resource inputs, outputs such as
discharges and wastes, and a discussion of our effects on the 4.7
environment.
4.6

4.5
2000 2001 2002 2003 2004

Total Electricity Usage

(including Refinery to Auckland Pipeline)
Petajoules Gigajoules/Tonne Feedstock
0.9 0.19

0.8 0.18

0.7 0.17

0.6 0.16
2000 2001 2002 2003 2004

Hydrocarbon Fuel Usage

Petajoules Gigajoules/Tonne Feedstock
15.2 3.10

15.0 3.05

14.8 3.00

14.6 2.95

14.4 2.90

14.2 2.85
2000 2001 2002 2003 2004

Water Usage
(Megatonnes)
1.65

1.60

1.55

1.50

1.45

1.40

1.35
2000 2001 2002 2003 2004
 Only cooling water is recycled for use on site. Groundwater is
Water Extracted for Water Table Depression extracted as part of the water table depression system to prevent
(Kilotonnes) any hydrocarbon in groundwater from leaving the site. All
460 extracted groundwater is treated and then discharged. Any
hydrocarbon present is removed and reprocessed as an input to
440
the refining process.
420
Discharges to Air
400
There are three main discharge points for emissions to air from
380 our site. These are the “A” Block stack, the multi flue stack, and
the flare system. The discharges are monitored for a wide range
360 of contaminants. Two of special interest are sulphur and carbon
2000 2001 2002 2003 2004
dioxide, due to their potential impact on the environment.

Sulphur dioxide is formed from the combustion of hydrocarbon

Outputs (Discharges, Emissions, Waste) fuels that contain sulphur, and from processes in the Refinery
that remove sulphur from intermediate products.

Sulphur Dioxide Emissions To substantially reduce potential sulphur dioxide emissions from
non combustion sources sulphur is recovered from the process
S02 Tonnes % Mass SO2 to Feedstock Ratio
4400 0.10 using the sulphur recovery (SRU) and Shell Claus Offgas
Treatment (SCOT) units which together were estimated to be
4200 0.09
99.36% efficient in removing sulphur in 2004 (99.83% in 2003).
4000 0.08 Recovered sulphur is sold for use in the fertiliser industry.

Our resource consent has several conditions that limit sulphur

3800 0.07
dioxide emissions. One of these conditions limits our yearly
3600 0.06 average emissions of sulphur dioxide to 12 tonnes per day.
However, the other conditions allow for variations in our
3400 0.05
processes such as plant upsets, start-ups and trips, by allowing us
2000 2001 2002 2003 2004
to discharge at higher rates for limited periods of time. The
following Table shows the rate and the corresponding amount of
time available under the consent, and our end of year position.
Carbon Dioxide Emissions The remaining time available at the end of this year indicates full
(Megatonnes)
compliance and is testament to the improved reliability of these
1.08
units following the disappointing performance in 2003.

1.06 Discharge Rate as a one hour Consent Limit Allowable 2004 End of Year Position
rolling average (tonnes/day) Time Per Year (hours) (hours available)

1.04 > 40.8 8.76 4.95

> 30 87.6 68.78
1.02 > 24 876 819.53

1.00
Monitored ambient sulphur dioxide levels over the year at all
2000 2001 2002 2003 2004 three sites in the Whangarei Heads area remained well below the
Ministry for the Environment’s Ambient Air Quality Guidelines
Amount of Flare and proposed National Standards.
(% Mass of Intake)
0.08

0.06

0.04

0.02

0
2000 2001 2002 2003 2004

17
 Environmental Performance continued

Discharges to Water
All of the wastewater from process units, storm water, the
effluent water treatment plant, and the groundwater recovery
system is collected in the storm water basin prior to discharge
during which it is monitored on a daily basis for a range of
contaminants as indicated in the table below. Conditions of our
resource consent to discharge wastewater into the Whangarei
Harbour contain strict limits on the quality of the discharge.

All wastewater is managed onsite without being sent to municipal

treatment facilities.

Resource Consent Limits on Discharges to Water

Daily Max. 30 Day Average
pH range 6-9 n/a
Temperature Max. 37°C n/a
Faecal Coliforms n/a 4000 Org/100ml
BOD5 70 mg/l 40 mg/l
TSS 50 mg/l 30 mg/l
COD 540 mg/l 280 mg/l
TPH 12 mg/l 6 mg/l
Phenols 0.5 mg/l 0.15 mg/l
Ammonia 85 mg/l 40 mg/l
Sulphides 0.5 mg/l 0.15 mg/l

NZRC segregates its waste – Peter McCartain (above) disposing of

cardboard and Damien Murray (left) of Marsden Point Construction
disposing of encapsulated asbestos materials.

Discharges to Water
Discharged kg/Year
TSS 78,250
OIL 4,862
SULPHIDE 1,025
PHENOL 478
NH3/NH4 AS N 7,621
BOD5 48,791
COD 218,882
TOC 65,197

18 Total Water Discharged (m3) 4,620,800

 Panel Operator, Mike Bull, inspects the new online Sulphide Analyser.

Following the increase in non- While the implementation of the above measures were undertaken at
compliances last year for parameters such various stages throughout the year, the combined overall effect, as
as sulphide and Total Suspended Solids indicated by the graph below, shows that the measures taken were
(TSS), NZRC undertook a number of steps becoming increasingly effective in reducing the monthly frequency of
to curb this disturbing trend. These steps non-compliances. Further work will be carried out in 2005 to ensure the
have included: trend continues as we attempt to eliminate all non compliances.
• The installation of an online sulphide No adverse environmental effects have been identified as a result of any of
analyser to stop the discharge of the excursions.
wastewater to the harbour before
consent limits are exceeded;
• The raising of the minimum Storm
Non-compliance Record 2004
(Frequency of Non-compliance)
Water Basin (SWB) level to minimise
15
the disturbance of sediment laden with
sulphide which contributes to elevated
12
levels of TSS and sulphide in the
discharge when disturbed by influent;
9
• The cleanout of the SWB to remove
sulphide laden sediment; 6
• The immediate alarming of high
results on the control room panel as 3
soon as the results of laboratory
analyses are keyed into the system 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
allowing for shorter periods of non-
compliance and minimised potential
for environmental effects; and NZRC has a policy of proactive cooperation with the Northland Regional
Council on all environmental issues.
• Continued operator training on
effluent water treatment units and No formal enforcement action has been taken against the Company
resource consent requirements. during 2004.

Excursions above Monitored Consent Conditions (Water)

Parameter TSS Sulphide Phenol FCol pH Total
Instances of daily limit non compliance 10 25 1 n/a 1 37
Instances of monthly average limit non compliance 1 6 1 2 n/a 10
Total 11 31 2 2 1 47 19
 Thomas Zengerly presenting cheque for "Project Crimson" to
Environmental Performance continued Margie Maddren of the Forest and Bird Society and Craig Brown,
past Mayor of Whangarei.

Disposal Summary
Recycled (tonnes) Landfill (tonnes)
Paper Wood Steel Aluminium Sludge Carbon Carbon Refractory Domestic Wood Concrete Site Bitumen Garnet Alumina
Pallets Bags Waste Clean-up Drums Catalyst
4.92 0 400.620 7.17 1,179.54 623.62 5.06 0 210.549 117.54 0 0 155.68 0 25.08

Waste Management Summary (tonnes) (RAP) that conveys finished products to Wiri. The
2000 2001 2002 2003 2004 length of this pipeline is just under 170 km and
Total Landfilled 1,161.20 2,075.09 1,993.61 2,642.73 2,317.07 provides both an energy efficient and safe way of
Total Recycled 196.20 263.75 163.57 246.30 412.71 transporting hydrocarbons.

Company sponsored beach cleanups and the

restoration of native plants such as the
Environmental Effects pohutukawa continued in 2004.

This year the New Zealand Dotterel which co-exists

With the exclusion of one complaint alleging adverse health with Refinery operations has once again had a
effects near the end of a Refinery Shutdown, and occasional successful breeding season with numerous nesting
odour and visual smoke complaints, ongoing Northland Regional pairs and chicks being observed.
Council and NZRC self monitoring did not identify any significant
NZRC is proactive in taking steps to avoid the
adverse effects on the environment from our operations.
disturbance of this endangered species that is listed
A comprehensive and ongoing suite of testing and monitoring is
on the International Union for Conservation of
continuing, covering shellfish, soils, marine sediments, water
Nature and Natural Resources (IUCN) Red List.
quality, air quality, and vegetation.

Environmental Expenditure
Complaints Received
2000 2001 2002 2003 2004 The expenditure on the operation of the
Complaints 15 10 8 17 24 Environmental Department for the year was
$378,095 ($500,209 in 2003). In addition, there is
The Refinery has a large physical operational footprint of 1.195 significant expenditure on operating and
square kilometres and actively manages the site and its maintaining environmental protection systems as
20 surrounds. NZRC also operates the Refinery to Auckland Pipeline part of normal Refinery operations.
T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Social
Performance
The Company, in its dealings with employees, site
contractors, our customers, the local community and
all other stakeholders, is committed to being a fair
and caring employer and a sensitive corporate
citizen and neighbour.

Engineering Manager, Mike Forbes and TWNZ Manager Ian Hendrikse observing a heat exchanger tube pull.
 Social Performance continued
Employee Numbers
As at 31 December 2004, the Group employed 309 staff (Dec
2003:303), of which 132 (43%) were on a collective agreement
with the Engineering, Printing and Manufacturing Union or the
National Distribution Union, 177 (57%) were on individual
employment agreements, One person is seconded from BP for the
Future Fuels Project. In addition to the above, the Company has
7 people on overseas assignments for career development.
Contractor Numbers
The Company’s alliance with Transfield Worley NZ (TWNZ),
which commenced in 2001, continues on a positive path.
TWNZ’s role is to manage a significant portion of the Engineering
and Maintenance activities on site. The number of contractors
needed to carry out these activities varies from time to time to
meet varying workloads. Measurement of the contractor
numbers is in terms of “full time equivalents” (FTEs). In 2004
there were 240 FTEs at the Refinery (2003: 226).
Collective Agreement and Employee Relations
Employer, employee representatives and union officials meet
monthly to discuss, understand and progress issues and initiatives
arising from the employment relationship. The collective
agreement (or Cojoint agreement) covers all collectively
employed staff. The Company values the good working
relationship that it has with the Unions and union delegates.
Warren Manning and Terry Stuart of Ross Insulation lagging pipe.
22
In December 2003 a new collective agreement was
signed for a three year term. The negotiation
process was carried out in accordance with the
provisions of good faith as contained in the
Employment Relations Act.
The Company complies with such international
standards as the International Labour Organisation
(ILO) principles to ensure that fair and equitable
practices are practised with all employee matters.
The Employment Relations Act 2000 lays out the
process for claims and allows for individuals to file
any personal grievance claims – in 2004 no claims
were filed against the Company. No specific
training on human rights is given by the Company,
however this subject is covered in the “first line
management” training undertaken by managers
and supervisors.
The Company acknowledges the individual’s right
to freedom of association, and in accordance with
the Employment Relations Act all employees have
the freedom to choose whether or not to join or
form a union. No preferential treatment is applied
whether an employee is or is not a member of a
union.
South Pacific Instrumentation technician, Tony Urqhart overhauling a control valve in the workshop.

Recruitment, Retention and Selection Remuneration of Employees

The Company is committed to the principles of The number of employees in the Group (not including Directors)
Equal Employment Opportunity. Reviews are whose remuneration exceeded $100,000 is as follows:
carried out to ensure that all of our employment
2004 2003
related decisions are made on the basis of suitability $000 With Severance Without Severance With Severance Without Severance
for the job function, not on the basis of personal 100-109 – 41 – 34
characteristics unrelated to ability. 110-119 – 24 – 13
Of 26 new starters with NZRC, 13 were permanent, 120-129 – 10 – 6
5 fixed term appointments, 6 Future Fuels Project 130-139 – 6 – 2
and 2 Apprentices. 140-149 – 1 – 1
160-169 – 1 – –
Employee turnover in 2004 was 6.3% compared to 170-179 – 1 – 1
10% in 2003. The Company’s expectation is for 190-199 – 1 1 1
employee turnover to be around 10%. 250-259 1 – – –
260-269 – 1 – –
17 employees left NZRC in 2004
290-299 – – – 1
Resignations 9
320-329 – 1 – –
Fixed term agreement expired (includes vacation students) 5
340-349 – – – 1
Retirements 2
360-369 – 1 – 1
Retirement because of ill health 1
380-389 – 1 – –
Absenteeism 560-569 – – – 1
700-709 – 1 – –
Absenteeism, which includes time off for sickness,
special discretionary leave and ACC recovery, is not
Current payroll and benefits paid to Employees (excludes
a significant issue for the Company with 3.4%
provisions for future benefits):
being recorded in 2004 compared with 3.2% in
2003. The introduction of the Holidays Act in April 2000 2001 2002 2003 2004

2004 has had little effect on absenteeism to date. $000 26,849 25,660 26,554 29,041 32,206 23
 Left to Right: Jerome Kerrigan, Dennis Martin, Andrew Tripe, Mike Forbes, Thomas Zengerly and David Keat.
Executive Team
Thomas Zengerly
General Manager and Chief Executive Officer
Seconded from Shell to NZRC from September
2002. Holds Diploma and PhD in Chemistry.
Joined Shell in Germany in 1986 and held
several local and regional positions mainly in
manufacturing and distribution for Shell in
Germany and the Netherlands. Refinery
director for Shell Harburg, a refinery near
Hamburg, Germany from 1997 to 2002.
Jerome Kerrigan BSc (Chem Eng)
Refining Manager
Has been involved in the oil industry for over
30 years, and more specifically at NZRC for the
past 20 years in a variety of operational and
commercial roles. Seconded to Shell for four
years in Thailand for the RRC start-up in 1995.
Previously worked for Shell in the UK and
BORCO in the Bahamas.
Dennis Martin BCA CA
Company Secretary and Finance Manager
Joined NZRC in January 2001 from Billiton
and BHP, where he held several roles in the
24 financial management and treasury functions.
Mike Forbes BEng (Hons) Mechanical Engineering (CEng)
Engineering Manager
First half of his career was in the
petrochemicals industry in Europe. In 1988 he
moved to Shell Australia and filled various
roles in engineering management within
Australia and Holland. Prior to joining NZRC
in April 2002, he was Engineering Manager for
the Shell Refinery in Geelong.
Andrew Tripe B.A. (Economics); Dip. Business Studies
Human Resources Manager
Joined NZRC in March 2003 from a multi-
industry change management background
including assignments with IBM in London
and Deloitte Consulting in NZ.
David Keat BSc, BE(Chemical and Materials)
Business Development Manager
Rejoined NZRC in February 2005 after six
years in Gas to Liquids (Sarawak) and Gas
Liquifaction (Abu Dhabi). Prior to that he
held a very wide variety of technical,
operational and managerial roles at NZRC
between 1985 and 1999.
Personal Development and
Technical Training
The company has a comprehensive Performance,
Development and Appraisal system in place. The process,
which aligns aspects of personal development and business
goals, is undertaken formally with managers three times
per year to set expectations and review progress.
The greater focus on leadership, management and
supervisory development which began in 2003 has
developed in 2004 in the following areas:
• Line management courses offering Level 3 NZQA
courses were run. In 2005 Level 4 will be offered to
qualifying staff members.
• Training and competency management system
improvements.
• Extended Leadership Group forums (including our
current and future leaders) were established as part of
the “Leadership Development Programme” initiative to
progress and stimulate leadership thinking and
behaviours.
• Four people competed in a virtual business game
competing with other teams around the country.
Other initiatives in the learning and development
framework which continued to progress in 2004 included:
• Induction program – a comprehensive, formalised
program is established.
• Graduate development – a graduate development
programme is in place to ensure that the full potential
of our graduates is realised.
• Apprentice programme – the Company has recruited
two apprentices in 2004. Each year two more will be
recruited until there are eight apprentices on site.
• Succession planning – the Company ensures there are
development programmes in place to cover key
positions.
• Coaching/Mentoring – a “Leader as Coach” programme
was progressed in 2004 with mentors being identified
for apprentices. Further development of this concept
will be considered in the future in other areas on site.
Conflicts of Interest
An extract from NZRC’s Business Principles clearly sets out
the Company’s position:
“The Company insists on honesty, integrity and fairness in all
aspects of our business and expect the same in our relationships
with all those with whom we do business. The direct or indirect
offer, payment, soliciting and acceptance of bribes in any form are
unacceptable practices. Employees and directors must avoid
conflicts of interest between their private financial activities and
their part in the conduct of Company business”.
Other Employee Benefits/Practises
• Additional leave at management discretion is available
over and above any contractual or statutory
requirements.
• Disability and retirement funding is available for those
in the Pension Fund or the Staff Superannuation Plan.
• Some existing employees are entitled to four weeks’
annual leave, contributions to healthcare, long service
leave and retirement bonuses.
• The Company supports study towards formal
qualifications.
• State of the Company meetings communicate to staff
and contractors safety and operational issues.
• Recognition of long service.
• Retirement planning seminars for staff approaching
retirement age.
One of the Extended Leadership groups meeting.
Back L to R: Geoff Taylor, Dan Robson, Robert Patterson, Julian Young and Wayne
Porteous. Front: Andrew Hindess and Thomas Zengerly.
 Social Performance continued
Community Support
The Company is strongly committed to the well-being of
the local community. A highlight of 2004 was the very
successful Open Day which attracted many visitors to
the site and enabled NZRC to help the local hospice with
a cheque for $10,500 made up of all the “gold coin”
donations collected on the day. NZRC also contributes
to a number of other initiatives and activities. During
2004 it made the following contributions:
St Johns Ambulance
Central Northland Science Fair
Project Crimson - Pohutukawa Trees
Northland Business Development “StartRight”
Whangarei Heads Citizens Association
Whangarei Coastguard
In maintaining its longstanding relationship with
Patuharakeke Iwi, the Company gave its annual $3000
tertiary study grant in 2004 to Huia Orr to assist with
her business and law degree at Auckland University.
Staff Support and Leisure
Over five thousand dollars was provided so that
employees could participate in various activities
throughout 2004 such as the Kerikeri half marathon,
the Company golf tournament, twilight hockey, soccer
and rugby, Kensington Fitness Centre and the “Beach
to Basin Fun Run”.
In addition, the Company subsidises member
subscriptions of the NZRC Sports and Social Club.
Ian Niblock (NRC Harbourmaster) , Harry Dynhoven (MP), Thomas Zengerly (NZRC CEO), Russell Kilvington (Marine Safety Authority) with Dave Gray and Ray Martin
(Whangarei Coastguard) in front of new rescue boat sponsored by NZRC.
26
This year the Club had a very active year and offered
discounted entry to its members (including retirees) and
their partners to such activities as:
• Cave Rider trips to the Poor Knights to see the Riko
Riko caves.
• Musicals such as Mama Mia and Saturday Night Fever
in Auckland.
• Visit to Whangarei’s very own Lion Man.
• Viewing of a Harry Potter movie.
• Go karting in Auckland.
• Halloween Ghost Tour at the Heritage Park Museum.
• Lions Firework Spectacular at Okara Park.
$5,000
$7,500 The Company provides an independent professional
$5,000 counselling service and an on-site industrial chaplain for
employees.
$4,500
$500
Political Activities
$15,000
An extract from NZRC’s Business Principles clearly sets out
the Company’s position:
“We do not make payments to political parties, organisations or
their representatives or take any part in party politics. However,
when dealing with governments, NZRC has the right and the
responsibility to make its position known on matters which affect
the Company, its employees, customers or shareholders. NZRC also
has the right to make its position known on matters affecting the
community, where it has a contribution to make. Of employees:
Where individuals wish to engage in activities in the community,
including standing for election to public office, they will be given the
opportunity to do so where this is practical in relation to their job”.
Each year NZRC receives visits by representatives of
government, various parties and other interested individuals
to discuss energy issues relevant for New Zealand.
Quality, Health,
Safety, Security and
Emergency Services

Quality, Health, Safety, Security and

Emergency Services are areas that require
the same committed focus by the
Company as any of its other critical
business activities. These activities are
about how well we manage and care for
the well being of our staff, our contractors
and our visitors every day on the Refinery
site. These key activity areas provide
continuous improvement and sustainable
development platforms that the Company
needs to succeed in to become the best we
can be.

In addition to the designated QHS Team

members there are also another 500 plus
personnel on the team and these are the
ones that really make the difference.
These are the staff members and
contractors who carry out the work face
activities. Without their commitment
NZRC would not have a healthy and
safe site.

The following section provides an

overview of the focus areas and results
for 2004.

Committed Performance
and Leadership
Sustained improvement to QHS
performance is the focus for everyone on
site and is lead by a very committed QHS
Team. The elements of this focus are:
comprehensive site inductions, planning
each task to ensure the wellbeing of all
personnel on site, training, pre-job start
talks, ‘on the job’ discussions, safety
audits, thorough analysis of incidents and
‘near misses’, rehabilitation, and general
guidance. The mentoring of work teams
and supervisors, to ensure that an
appropriate level of diligence and effort is
consistently applied, is an essential part of
the Team’s daily activities.
Michael Pita, contractor at a Job Start
Up safety meeting with Health and
Safety Advisor, Leigh Dodd.
 Social Performance continued

Safety Performance 1995 - 2004

NZRC Contractors Combined
25

20
TRCF

15

10

0 0
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Achievements & Results In addition to these external certification and their

The graph above indicates the number of Total Recordable Cases
(including Lost Time Injuries LTIs, Restricted Work Cases RWCs
and Medical Treatment Cases MTCs) split between NZRC staff and
contractor personnel, and the combined result.
The performance in 2004 shows a continued improvement and
demonstrates what can be achieved - the best performance ever
for NZRC and Contractors. The milestone of a combined NZRC
and contractor two million manhours without an LTI was
achieved in May 2004.
All incidents on site are investigated and reviewed weekly by a
senior management review committee and all actions are tracked.
All incidents are communicated to the site and learning points are
circulated and discussed at toolbox meetings.
Certifications achieved or renewed during this period included;
• Port Security under the Marine Security Act.
• Test Certificate as a Hazardous Facility site under HSNO.
• ISO9001 Quality Management Systems in accordance with
the 2000 version of the standard.
• ISO14001 Environmental Management Systems.
• ISO17020 Inspection Body for pressure equipment inspection.
• ISO17025 Metrology and Calibration for gauges and relief
valves.
• ISO17025 Laboratory Testing for product quality.
• AS/NZS2885.3 Pipeline operation & maintenance, Refinery to
Auckland pipeline.
• ACC Partnership Programme tertiary level confirmed.
• Manufacture of Jet A-1.
28 • Electrical Employer Licence.
respective audits a considerable number of internal
audits take place across the various business areas
and activities to assess the compliance and
effectiveness of our systems, process, reporting and
records.
Engagement
HSE Steering Committee & HSE Representatives
Since 2002 a site HSE committee has existed with
representation from all work areas of the site and
including both staff and contractors. The
committee meets every two months, promoting
HSE across the site. Discussions within the work
teams focus on issues, concerns, initiatives and
improvements. The committee consists of twenty
six members which includes four management
representatives. A ratio of approximately one
representative per twenty personnel on site is
achieved. The key focus in 2004 has been on
continuing to develop an “In Safe Hands” work
culture within the work force. Part of this focus
encourages staff to take the approach of “Stop -
Take 5” – a process whereby, before the
commencement of a task, consideration is given to
the hazards and other activities which surround it
and the adequacy of the controls in place. Equally
important is how well the personnel involved in
the planning process, the design and the allocation
of equipment etc have considered the safety aspect
in the overall job.
 Sniffer dogs check for non-permitted substances at site entry.

Health and Safety Checks In July 2004 HSE Reality Checks were introduced. These are
Measure 2004 carried out by the supervisors and work teams at any time and
Checks Conducted 188 have proved to be valuable in highlighting potential hazards and
Checks Completed 137 work method risks.
Completion Ratio 73% Near Miss Reporting
Positive Comments 428
Number of Actions 193 The use of a simplified “Near Miss” reporting pocket card was
introduced in 2004, together with a phone help line for reporting
At Risk Categories Observed hazards, issues and concerns. Issues raised are followed up and
Category 2004
where appropriate transferred to the formal HSE Incident
Personal Protective Equipment 31 reporting system. Between the various systems the reporting of
Positions of People 10 near misses has increased substantially.
Ergonomics 22 Customer Heath & Safety
Tools & Equipment 24
All feedstock and product transfer by the refinery to its customers
Procedures 42
is covered by specification certificates which describe the type,
Orderliness 69
volume and specification of the material under transfer. Both
TOTAL 198
customers and NZRC hold Material Safety Data Sheets to cover
HSE Checks the specific components and the composite material and these are
available in key locations around the site. In 2003 NZRC
HSE checks which encompass the entire site on a
embarked on the $180 million Future Fuels project with the
monthly basis have continued throughout 2004.
objective of producing cleaner fuels that will assist in improving
These checks are carried out by management, the
the air quality in New Zealand by lowering the sulphur content of
HSE steering committee members, line managers
diesel and the benzene content of petrol. This project is on track
and supervisors from various areas. These checks
for completion in 2005.
provide a view of the level of compliance and the
effectiveness of work planning in the areas and also Other material received by or dispatched from the Refinery (e.g.
provide opportunities to interact with the additives, process chemicals and materials for the laboratory) are
workforce. Findings from these checks are treated all received or dispatched via the warehousing operation or the
as opportunities for improvement and are agreed laboratory and are checked for labelling, appropriate handling
with the supervisor of the work area concerned on and storage instructions prior to receipt or dispatch.
completion of the check and then tracked until the
items raised have been addressed. 29
 Social Performance continued
Dr McLeod conducts routine check-up on Steven Tyrrell.
Occupational Health Management
The Company has a comprehensive occupational health
management system in place. This includes attendance on site by
an Occupational Health Specialist on a weekly basis and the
provision of nursing staff. In addition emergency services
personnel are trained to a pre-hospital care standard and provide
an on-site, fast response capability on an “around the clock”
basis. All injuries and occupational illnesses are recorded,
classified and reviewed. The Company continued at “Tertiary
Level” in the ACC Partnership Programme in 2004. No
occupational illnesses were recorded in 2004.
The review and reconciliation of Health risk assessment data
collected in 2003 to identify any additional monitoring or changes
to working conditions continued in 2004 and will be completed
during 2005.
General Occupational Health Monitoring Activities for 2004
Health Monitoring/Medicals
Ergonomic assessments
Doctor Consultations
Nurse Consultations
Vaccinations
Hearing loss assessments (most non-work related)
30 Rehabilitation approx per month (includes work and non-work)
Other specific health focus areas targeted during
the year included:
• A quit smoking campaign with a 45% success
rate for the 50 personnel who signed up.
• Noise / Hearing Loss Campaign – including
training and the effective use of ear plugs.
• Drugs / Alcohol Testing – for pre employment
medicals and on site drug detection using sniffer
dogs.
• Mole Checks to identify any risks for referral.
• Massage Therapist to treat staff on site.
• First Aid and Incident Control Awareness –
during QHSE days to over 700 personnel.
HIV/Aids/Hepatitis
The Company does not have a specific policy to
cover this health aspect. Legislation in NZ prohibits
265 discrimination and the company respects the rights
30 of the individuals in this regard and therefore does
300 not treat these diseases any differently from that of
450 any other health issue. All first aiders are trained
120 in how to take precautionary measures against
8 exposure.
6
Security & Security Personnel

Following a review of our security

systems and processes in 2003 a
number of improvements were
initiated in 2004 including
improvements to and realignment of
fence lines, clearing of vegetation to
improve visual capability, patrols and
personnel checks. There were also
changes to port security management
and the site was approved during
2004 by the Maritime Safety
Authority as a port facility, meeting
the requirements of the Maritime
Security Act. A number of projects
are in place for completion during
2005 to further improve the security
of the site.

The provision of security personnel

on site is contracted through a
specialist security company. The
training of the provider’s staff is
carried out to recognised standards
under NZQA.

Quality Systems

13 external audits were carried out

on our systems, processes and
facilities during 2004. These
confirmed the good practices on site
and while, as in any audit,
improvements are always identified,
there have been no major areas of
concern raised. Many practices were
identified and mentioned in reports
as being in accordance with “Best
Practice”.

External audits have included:

• Finance.
• Marine Operations and Facilities.
• Process Unit Operations design
and safeguarding.
• Security Management.
• ACC Injury Management.
• Pipeline Operations and
Maintenance.
• Manufacture of Jet A-1.
• Computer Security.
• Pressure Equipment Inspection
and Integrity Management etc.

Employee Raj Thambyah being checked at entry.

 QHS Learning & Development

Comprehensive training has

continued during 2004 with 25
different courses being delivered and
over 1300 individuals attending
specific training. Courses included
Approved Handler under HSNO,
Root Cause Analysis, H&S
Legislation, H&S Representative
roles, Fire extinguisher, Fork Lift,
Hearing Protection, Safety
Equipment, Working at heights etc.
The scope of the training programme
in many cases is far above the
minimum compliance standards
required. All training efforts include
contractors on site with costs being
covered by NZRC. In addition to
building the necessary specific
competencies and lifting performance
to higher levels on site, we hope this
training will be an effective way of
improving the individuals’ skill base
and safety awareness in their home
and leisure environment. We have
continued with our plans to work
with local contractor companies to
develop cross training between
companies. We have formed an
alliance with our core site contractors
to take this initiative even further in
2005.

NZRC emergency services provides

training such as fire fighting and
rescue for many external
organisations throughout New
Zealand, such as, the Fire Service,
Maritime Safety Authority, local
volunteer fire brigades and the Oil
Companies. The cost of this external
training is recovered.

Environmental learning and

development has concentrated on
the HSNO act in 2004 with 18
personnel being trained as Approved
Handlers.

QHS training costs for 2004 are in

the order of $800,000. A large
portion of this related to contractor
personnel. Because the Refinery site
is isolated, there is not a pool of
skilled and trained resources readily
available. The Company therefore
provides the necessary QHS training
on site. NZRC views the cost of this
training as a necessary investment in
32 the local labour force. Warren Were (Culhams) practices use of fire blankets, supervised by Wayne Williams, Emergency Services.
Number of people trained in 2004
Approved Handler 18
Supervisor (BICTO certified) 14
Building and area Wardens 8
Cherry Picker 19
Confined Space Entry 170
Innovation & Notable Events
Confined Space Entry Refresher 84
Dogman/Rigger 25 In Safe Hands
Fire Extinguisher 19 In the last quarter of 2003 a new initiative “In Safe
Fork Lift 7 Hands” was launched and rolled out across the site.
Gantry Crane 26 “In Safe Hands” provides a memory jogger pocket
H & S Legislation 45 card to all individuals and work teams for use prior
H & S Representative role 26 to starting work to assist in the identification of
Hearing Protection 50 hazards and the appropriate means of Elimination,
Huka Crane 1 Isolation or Minimisation and application of
Job Safety Analysis 24 controls. During 2004 some 20,000 of these cards
Manual Handling of Hazardous Substances 18 were used on site and on the Future Fuels Project.
Person In Charge of Work (PICW) 45
Root Cause Analysis 15 QHSE Days
Safety Equipment 112 In August 2004 the Company held a series of one
Working at Heights 37 day QHSE Days which were attended by all staff
Ford Advanced Driver School 30 and contractors. In total 710 personnel attended
Other Ad Hoc Training (RAM, Offsite training to other companies) 30 over the course of ten days. Each day covered an
Emergency Services For External Organisations 310 aspect of safety related to our site, a major learning
Operations Fire Training 150 event that has occurred elsewhere and how it
Volunteers Fire Training 21 could relate to our site followed by practical
SUB TOTAL 1304 learning that each person could apply in the every
QHSE Days 710 day activities at home or at work.
Shutdown Training 1200
TOTAL 3214 40th Anniversary Open Day.
 Emergency Exercises

A number of emergency and

crisis exercises where held
during 2004. One of these
included external emergency
response organisations. The
Refinery works under the Co-
ordinated Incident
Management System (CIMS)
framework which is also
utilised by external emergency
services. Another exercise
covered a scenario where a
major slip had occurred on the
Refinery to Auckland pipeline.
On the same day, one of the
oil companies and the Wiri
terminal simultaneously
undertook the same scenario
exercise to consider the effects
on their organisation should
such an event occur. Exercises
for port security were also
carried out in conjunction
with North Port, providing an
opportunity to test and
become familiar with each
others systems.

34
T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Future Fuels
Project 2004
Project progress in 2004 remained on target for
delivery of clean fuels to the market place by
1 January 2006. The year saw the project
progress from 31% complete to 88% complete.
Major milestones included; the completion of engineering, the arrival and
erection of pre-assembled units and the setting of all heavy lift equipment.
The project enters 2005 with a focus on field construction activity with all
off-shore activity essentially completed. Priority number one remains safety.
 Site Preparation - January 2004

Beginning of civil works - March 2004

Construction as at December 2004

36
T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Economic
Performance
For the Year Ended 31 December 2004

Auditors’ Report 38

Financial Highlights 39

Statement of Accounting Policies 40

Statement of Financial Performance 42

Statement of Movements in Equity 42

Statement of Financial Position 43

Statement of Cash Flows 44

Notes to the Financial Statements 46

Trend Statement 56

Shareholder Information 57

Share Price Performance 58

Suppliers 59

Taxes Paid 59

37
 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Auditors’ Report

PricewaterhouseCoopers
188 Quay Street
Private Bag 92162
Auckland, New Zealand
www.pwc.com/nz
Telephone +64 9 355 8000
Auditors’ Report Facsimile +64 9 355 8001
To the Shareholders of The New Zealand Refining Company Limited

We have audited the financial statements on pages 40 to 55. The financial statements provide information about
the past financial performance and cash flows of the Company and Group for the year ended 31 December 2004
and their financial position as at that date. This information is stated in accordance with the accounting policies
set out on pages 40 to 41.

Directors’ Responsibilities

The Company’s Directors are responsible for the preparation and presentation of the financial statements which
give a true and fair view of the financial position of the Company and Group as at 31 December 2004 and their
financial performance and cash flows for the year ended on that date.

Auditors’ Responsibilities

We are responsible for expressing an independent opinion on the financial statements presented by the Directors
and reporting our opinion to you.

Basis of Opinion

An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial
statements. It also includes assessing:

(a) the significant estimates and judgements made by the Directors in the preparation of the financial
statements; and
(b) whether the accounting policies are appropriate to the circumstances of the Company and Group,
consistently applied and adequately disclosed.

We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned
and performed our audit so as to obtain all the information and explanations which we considered necessary to
provide us with sufficient evidence to give reasonable assurance that the financial statements are free from
material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

We have no relationship with or interests in the Company or its subsidiary other than in our capacity as auditors.

Unqualified Opinion

We have obtained all the information and explanations we have required.

In our opinion:

(a) proper accounting records have been kept by the Company as far as appears from our examination of
those records; and
(b) the financial statements on pages 40 to 55:

(i) comply with generally accepted accounting practice in New Zealand; and
(ii) give a true and fair view of the financial position of the Company and Group as at
31 December 2004 and their financial performance and cash flows for the year ended on that
date.

Our audit was completed on 24 February 2005 and our unqualified opinion is expressed as at that date.

Chartered Accountants Auckland

38
T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Financial Highlights
For the Year Ended 31 December 2004

2004 2003
$000 $000 % Change
Operating Results
Operating Revenue 280,434 188,400 +48.85
Other Income 940 1,218 -22.82
Operating Surplus before tax 151,176 59,581 +153.73
Operating Surplus after tax 97,613 37,002 +163.80
Net Cash from operating activities 120,660 60,401 +99.76

Financial Position at Year End

Issued and paid up capital 24,000 24,000 0.00
Total Shareholders’ Funds 378,114 318,879 +18.58
Total Assets 542,250 422,860 +28.23

Share Indicators
After tax profit to average Shareholders Funds’ 25.8% 11.6% +122.48
Earnings per Share $4.06 $1.54 +163.64
Net Asset Backing per Share $15.75 $13.29 +18.51
Share Price 31 December $31.80 $15.45 +105.83
Number of Shareholders 2,321 2,499 -7.12

Distribution to Shareholders
Ordinary Dividend per Share $1.60* $1.10
Dividend paid 38,400 26,400

* Refer Note 4 for final dividend details

39
 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Statement of Accounting Policies

For the Year Ended 31 December 2004

REPORTING ENTITY Assets owned at 1 January 1977 were recorded at 80% of

depreciated replacement cost at that date. This is regarded as their
The New Zealand Refining Company Limited is a company registered
deemed cost. This treatment complies with the transition provisions
under the Companies Act 1993, and an issuer pursuant to the
of Statement of Standard Accounting Practice SSAP-28: Accounting
Securities Act 1978.
for Fixed Assets, which allowed assets to be retained at the carrying
The financial statements for the “Parent” are for The New Zealand
value established prior to SSAP-28 coming into effect from 1 October
Refining Company Limited. The consolidated financial statements
1991. Financial Reporting Standard FRS-3: Accounting for Property,
for the “Group” are for the economic entity comprising the Parent
Plant and Equipment continues to allow this treatment.
and its subsidiary, Independent Petroleum Laboratories Limited.
When an asset is disposed of, any gain or loss on disposal is
The financial statements of the Parent and the Group have been
calculated as the difference between the disposal proceeds and the
prepared in accordance with the Financial Reporting Act 1993.
carrying value of the asset, and is recognised in the statement of
MEASUREMENT BASE financial performance.

The accounting principles recognised as appropriate for the
measurement and reporting of financial performance and financial
position on a historical cost basis are followed by the Parent and the
Group.
PARTICULAR ACCOUNTING POLICIES
Depreciation is provided on a straight-line basis on all property, plant
and equipment other than freehold land and capital work in
progress. The depreciation rates applied allocate the assets’ cost
less estimated residual value (which is zero in all cases except for
catalyst containing platinum), over the estimated useful lives.

The following particular accounting policies, which significantly The estimated useful lives are:

affect the measurement of financial performance, financial position Land improvements 20 years
and cashflows have been applied: Buildings and Jetties 20 years

Basis of Consolidation Motor Vehicles 4-7 years

The group financial statements consolidate the financial statements Equipment (including computers) 3-7 years

of the parent and the subsidiary it controls, using the purchase Catalysts 3-10 years
method. All material transactions between the parent and the Refining Plant – Tankage 30 years
subsidiary are eliminated on consolidation.
– Rotating Equipment 20 years
Property, Plant and Equipment – Piping, 20 years

The group has eight classes of property, plant and equipment: – Vessels 20 years
– Freehold Land – Instruments 10 years
– Buildings and Jetties When the economic worth of the property, plant and equipment was
– Refining Plant evaluated at 31 December 2000, the remaining useful life of the
– Catalyst refinery plant and buildings was assessed as 20 years. In April
2003, the Board approved the building of two new pieces of plant, a
– Refinery to Auckland Pipeline
new Hydrodesulphurising Unit and a Benzine Reduction Unit. This
– Wiri Terminal
“Future Fuels Project” ensures that the Parent Company will
– Equipment and Vehicles
continue its life as a refiner of oil products for an indefinite time.
– Capital Work in Progress – Plant Therefore the lives of any new components are in accordance with
All property, plant and equipment are initially recorded at cost. the estimates listed above.

40
If the recoverable amount of an item of property, plant and
equipment is less than its carrying amount, the item is written down
to the recoverable amount. Because the assets are recorded at cost,
any write down is recognised as an expense in the statement of
financial performance. An impairment write down is reversed
(wholly or partially as appropriate) if there is a change in the
estimates used to determine the amount of the write down. The
reversal is recognised in the statement of financial performance.
Consumable Stores and Spares
Inventories of materials and supplies are valued at weighted average
cost with an allowance for obsolescence where appropriate.
Accounts Receivable
Accounts receivable are stated at expected realisable value.
Leases
Finance leases, under which the company assumes substantially all
of the risks and benefits incident to ownership of the leased item,
are capitalised at the present value of the minimum lease
payments. Lease payments are apportioned between finance
charges and lease principal. Currently there are no finance leases in
place.
Operating lease payments for land and other plant and equipment
are expensed in the period incurred.
Financial Instruments
Financial instruments recognised in the statement of financial
position include cash balances, bank overdrafts, receivables, term
deposits, payables and term borrowings. In addition, the Group is
party to financial instruments with off-balance sheet risk to reduce
exposure to fluctuations in foreign currency exchange rates and
electricity prices.
Gains and losses on contracts which hedge specific short-term
foreign currency denominated transactions are recognised as a
component of the related transaction in the period in which the
transaction is completed.
Employee Entitlements
Liabilities for annual leave, long service leave and retirement bonus
are recognised in the statement of financial position. The liability for
long service leave and retirement bonus is based on an actuarial
assessment and represents the present value of the estimated
future cash outflows, which are expected as a result of employee
services provided up to balance date.
Foreign Currency Transactions
Transactions in foreign currencies are recognised in New Zealand
dollars at the exchange rate in effect at the date of the transaction,
except for short-term transactions covered by forward exchange
contracts, which are recognised at the forward rates specified in
those contracts.
At balance date foreign monetary assets and liabilities are
translated at the closing rate, and exchange gains and losses are
recognised in the statement of financial performance.
Taxation
The income tax expense charged to the statement of financial
performance is the estimated tax in respect of the surplus for the
period after allowing for permanent differences between accounting
surplus and assessable income. Deferred tax is calculated using the
liability method applied on a comprehensive basis. A debit balance
in the deferred tax account, whether arising from timing differences
or income tax benefits from losses, is only recognised if there is
virtual certainty of realisation.
Statement of Cash Flows
Cash comprises cash on hand and call and short-term money
market deposits with New Zealand banks, net of bank overdrafts.
The Statement of Cash Flows summarises cash transactions in three
categories:
1. Operating activities, which include all cash transactions that are
not investing or financing in nature
2. Investing activities, which relate to the acquisition and disposal
of property, plant and equipment, and investments other than
those within the definition of cash.
3. Financing activities, which involve debt and/or equity capital
raising and repayment, and dividend payments.
CHANGES IN ACCOUNTING POLICIES
There have been no changes in accounting policies. All policies have
been applied on bases consistent with those used in previous years.
41
 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Statement of Financial Performance

For the Year Ended 31 December 2004
GROUP PARENT
2004 2003 2004 2003
Notes $000 $000 $000 $000

Operating Revenue 1 280,434 188,400 279,161 187,205

Operating Surplus Before Taxation 2 151,176 59,581 151,007 59,373

Taxation 3 53,563 22,579 53,478 22,579
Operating Surplus After Taxation 97,613 37,002 97,529 36,794

Minority Interest in Profit of Subsidiary (66) (55) – –

Operating Surplus Attributable to Shareholders of the Parent Company 97,547 36,947 97,529 36,794

Statement of Movements in Equity

For the Year Ended 31 December 2004 GROUP PARENT
2004 2003 2004 2003
Notes $000 $000 $000 $000

Equity at Beginning of Year 318,879 308,257 318,766 308,369

Unclaimed Dividends Written Back 5 3 5 3
Net Surplus for the Year 97,547 36,947 97,529 36,794
Total recognised Revenue and Expenses 97,552 36,950 97,534 36,797
Movements in Minority Interests (85) (72) – –
Dividends 4 38,400 26,400 38,400 26,400
Prior years dividends paid out 2 – 2 –
Equity at End of Year 378,114 318,879 377,898 318,766

These financial statements are to be read in conjunction with the Accounting Policies on pages 40 and 41, the Notes on pages 46 to 55 and the Auditors’ Report on page 38.

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Statement of Financial Position

As at 31 December 2004
GROUP PARENT
2004 2003 2004 2003
Notes $000 $000 $000 $000
Equity
Share Capital * 24,000 24,000 24,000 24,000
Retained Earnings 353,770 294,620 353,898 294,766
Shareholders' Equity 377,770 318,620 377,898 318,766
Minority Interests 344 259 – –
Total Equity 378,114 318,879 377,898 318,766

Non Current Liabilities

Payroll Provisions 12 3,375 3,608 3,375 3,608
Deferred Tax 3 10,050 8,102 10,050 8,102
Bank Loan 45,098 – 45,098 –
Total Non Current Liabilities 58,523 11,710 58,523 11,710

Current Liabilities
Bank Overdraft 8 40 64 40 34
Taxation 3 3,082 – 3,079 –
Accounts Payable 11 102,491 92,207 102,360 91,960
Total Current Liabilities 105,613 92,271 105,479 91,994
TOTAL EQUITY AND LIABILITIES 542,250 422,860 541,900 422,470

Non Current Assets

Property, Plant and Equipment 5 411,451 295,329 410,442 294,250
Shares in Subsidiary 6 – – 809 809
Total Non Current Assets 411,451 295,329 411,251 295,059

Current Assets
Cash and Short Term Deposits 8 6,594 19,484 6,572 19,484
Accounts Receivable 10 113,127 96,838 112,889 96,710
Consumable Stores and Spares 9 11,078 11,195 11,001 11,112
Loans to Subsidiaries 16 – – 187 91
Taxation 3 – 14 – 14
Total Current Assets 130,799 127,531 130,649 127,411
TOTAL ASSETS 542,250 422,860 541,900 422,470

* As at 31 December 2004 there were 24,000,000 shares issued and fully paid (2003: 24,000,000).
All ordinary shares rank equally with one vote attached to each fully paid ordinary share.

The Board of Directors of The New Zealand Refining Company Limited

authorised these financial statements for issue on 24 February 2005.

For and on Behalf of the Board:

......................................................................................... .........................................................................................
Sir Colin Maiden I.F. Farrant
Director Director

These financial statements are to be read in conjunction with the Accounting Policies on pages 40 and 41, the Notes on pages 46 to 55 and the Auditors’ Report on page 38.

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Statement of Cash Flows

For the Year Ended 31 December 2004
GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000
Cash Flows from Operating Activities
Cash was provided from:
Receipts from Customers 264,006 178,707 262,747 177,813
Interest Received 940 1,218 963 1,236
Net GST Received 897 – 865 –
265,843 179,925 264,575 179,049
Cash was applied to:
Payments to Employees (29,512) (26,416) (27,569) (24,542)
Payments for Supplies and Expenses (65,084) (72,217) (66,138) (73,349)
Income Tax Paid (48,519) (19,703) (48,437) (19,703)
Interest Paid (2,068) (191) (2,068) (190)
Net GST Paid – (997) – (979)
(145,183) (119,524) (144,212) (118,763)
Net Cash Inflow from Operating Activities 120,660 60,401 120,363 60,286

Cash Flows from Investing Activities

Cash was provided from:
Proceeds from Sale of Property, Plant and Equipment 119 20 119 20
Proceeds from Sale of Catalysts 1,139 69 1,139 69
Contribution from Minority Interest in Subsidiary 19 17 – –
1,277 106 1,258 89
Cash was applied to:
Purchase of Property, Plant and Equipment (132,004) (29,127) (131,740) (28,882)
Purchase of Catalysts (9,500) (211) (9,500) (211)
(141,504) (29,338) (141,240) (29,093)
Net Cash Outflow from Investing Activities (140,227) (29,232) (139,982) (29,004)

Cash Flows from Financing Activities

Cash was provided from:
Proceeds from Borrowings 55,000 – 55,000 –
Long Term Borrowings 45,098 – 45,098 –
Unclaimed Dividends 5 3 5 3
100,103 3 100,103 3
Cash was applied to:
Repayment of Principle on Borrowings (55,000) – (55,000) –
Dividends Paid to Shareholders (38,402) (26,400) (38,402) (26,400)
(93,402) (26,400) (93,402) (26,400)
Net Cash Inflow/(Outflow) from Financing Activities 6,701 (26,397) 6,701 (26,397)

Net (decrease)/ increase in cash held (12,866) 4,772 (12,918) 4,885

Opening cash brought forward 19,420 14,648 19,450 14,565
Closing cash carried forward 6,554 19,420 6,532 19,450
Comprising:
Bank Overdraft (40) (64) (40) (34)
Cash and Short Term Deposits 6,594 19,484 6,572 19,484
6,554 19,420 6,532 19,450

These financial statements are to be read in conjunction with the Accounting Policies on pages 40 and 41, the Notes on pages 46 to 55 and the Auditors’ Report on page 38.

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Statement of Cash Flows continued

GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000
Reconciliation With Operating Surplus
Operating surplus before minority interest 97,613 37,002 97,529 36,794

Add/(deduct) non-cash items:

Deferred tax movement 1,948 548 1,948 548
Depreciation and disposal of assets 17,994 16,667 17,660 16,377
Catalyst Depreciation and disposal of catalyst 6,131 7,580 6,131 7,580
Provision for Retirement Bonuses and Long Service Leave (233) 24 (233) 24
Reallocation of Future Fuels Costs – 5,522 – 5,522
Add/(deduct) working capital movements:
Consumable Stores and Spares 117 (1,074) 111 (1,074)
Accounts receivable (16,428) (9,693) (16,318) (9,755)
Loan to Subsidiary – – (96) 364
Accounts payable 10,422 1,496 10,538 1,577
Tax payable/(refundable) 3,096 2,329 3,093 2,329
Net Cash Inflows from Operating Activities 120,660 60,401 120,363 60,286

These financial statements are to be read in conjunction with the Accounting Policies on pages 40 and 41, the Notes on pages 46 to 55 and the Auditors’ Report on page 38.

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Notes to the Financial Statements

For the Year Ended 31 December 2004
GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000

Note 1
OPERATING REVENUE
Processing Fee 244,691 154,172 244,691 154,172
Pipeline Fee 26,420 25,973 26,420 25,973
Wiri Terminal Rental 6,525 6,525 6,525 6,525
Other Income 2,798 1,730 1,525 535
280,434 188,400 279,161 187,205

Note 2
NET OPERATING SURPLUS FOR THE YEAR BEFORE TAXATION
After crediting income of:
Interest received 940 1,218 963 1,236
940 1,218 963 1,236
After charging:
OPERATING COSTS
Purchase of process materials and utilities 21,294 31,745 21,101 31,556
Catalyst costs 1,666 1,417 1,666 1,417
Wages and salaries 29,610 26,945 27,667 25,071
Materials and contractor payments 33,797 23,896 33,464 23,641
Administration and other expenses 14,477 12,988 16,213 14,638
Operating lease expenses 148 112 145 109
Technical Service Fee (Shell) 2,038 2,094 2,038 2,094
Wiri Terminal land rent 500 500 500 500
Directors' fees 255 223 255 223
Directors' Retirement Provision – 89 – 89
Payments in lieu of Directors' Retirement Benefits 208 – 208 –
Auditors remuneration:
Statutory Audit fee 95 79 85 72
Internal Audit Fee – 61 – 61
Tax Services – 19 – 19
Consulting services – 1 – 1
Interest:
Bank Borrowings 968 191 968 190
Use of Money 1,100 – 1,100 –
Donations 37 43 36 43
Foreign exchange fluctuations (120) (135) (120) (135)
106,073 100,268 105,326 99,589

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Notes to the Financial Statements continued

GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000

Note 2 continued
After charging:
DEPRECIATION AND (GAIN)/LOSS ON DISPOSAL
Depreciation: (Note 5)
Land Improvements 765 758 765 758
Buildings and Jetties 1,448 1,418 1,448 1,418
Refining Plant 11,552 11,031 11,552 11,031
Refinery to Auckland Pipeline 940 921 940 921
Wiri Terminal 645 645 645 645
Equipment and Vehicles 2,717 1,831 2,383 1,541
Catalysts 5,587 5,938 5,587 5,938
Total Depreciation 23,654 22,542 23,320 22,252
Disposal of assets (73) 63 (73) 63
Disposal of catalysts 544 1,642 544 1,642
24,125 24,247 23,791 23,957
After charging:
OTHER ITEMS
Reallocation of Future Fuels Project costs (Note 19) – 5,522 – 5,522
– 5,522 – 5,522

TOTAL COSTS 130,198 130,037 129,117 129,068

NET OPERATING SURPLUS FOR THE YEAR BEFORE TAXATION 151,176 59,581 151,007 59,373

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Notes to the Financial Statements continued

GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000

Note 3
PROVISION FOR TAXATION
(i) Current Taxation
The taxation provision has been calculated as follows:
Net operating surplus for the year 151,176 59,581 151,007 59,373
Taxation at 33% 49,888 19,662 49,832 19,593
Plus taxation effect of depreciation on deemed cost assets 3,287 2,962 3,287 2,962
Effect on non deductible/non assessable items 363 6 375 6
Effect of losses carried forward (19) (69) - -
53,519 22,561 53,494 22,561
Under/(Over) provision in prior years 44 18 (16) 18
Taxation charge for the year 53,563 22,579 53,478 22,579

The taxation charge is represented by:

Tax payable in respect of current year 51,759 23,484 51,654 23,415
Tax refundable in respect of previous years (144) (1,453) (124) (1,384)
Deferred taxation in respect of the current year 1,840 (854) 1,840 (854)
Deferred taxation in respect of previous years 108 1,402 108 1,402
53,563 22,579 53,478 22,579

(ii) Taxation Payment

Refundable at 1 January 2004 (14) (2,343) (14) (2,343)
Tax payable above 51,615 22,031 51,529 22,031
51,601 19,688 51,515 19,688
Deduct tax paid 47,483 19,000 47,400 19,000
Deduct Supplementary Dividends (Note 4) 1,036 702 1,036 702
Payable/(Refundable) as at 31 December 2004 3,082 (14) 3,079 (14)

(iii) Deferred Taxation

In the statement of financial position the deferred tax provision
has been calculated as follows:
Deferred taxation at 1 January 2004 8,102 7,554 8,102 7,554
Deferred taxation charge for the year at 33% 1,840 (854) 1,840 (854)
Deferred taxation (release)/charge for previous years at 33% 108 1,402 108 1,402
Deferred taxation at 31 December 2004 10,050 8,102 10,050 8,102

(iv) Imputation Credit Account

Balance 1 January 2004 18,543 11,843 18,543 11,843
Taxation Paid 47,400 19,000 47,400 19,000
Less Attributed Dividends (17,877) (12,300) (17,877) (12,300)
Balance at 31 December 2004 48,066 18,543 48,066 18,543

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Notes to the Financial Statements continued

Note 4
DIVIDENDS
The Directors recommend a final dividend of 200 cents per share to be paid for the year ended 31 December 2004 out of tax paid profits
for the year. Full imputation credit will be attached to this dividend which will be payable in March 2005. Non-resident Shareholders will
receive a supplementary dividend of 35.2941 cents per share.
An interim dividend of 100 cents per share was paid on 28 September 2004, with imputation credit attached.
Non-resident Shareholders received a supplementary dividend of 10.58824 cents per share on the 2003 final dividend paid in March
2004 and 17.64706 cents per share on the 2004 interim dividend. The Company receives a tax credit equal to the amount of these
supplementary dividends (Note 3).

GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000

Total dividends for the year are:

Final (for 2003 year) 60cps (2002 50 cps) 14,400 12,000 14,400 12,000
Interim (for 2004 year) 100cps (2003 60 cps) 24,000 14,400 24,000 14,400
38,400 26,400 38,400 26,400

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Notes to the Financial Statements continued

Cost Accumulated Depreciation Net Book Value

2004 2003 2004 2003 2004 2003
$000 $000 $000 $000 $000 $000

Note 5
PROPERTY, PLANT AND EQUIPMENT
GROUP
Freehold Land & Improvements 51,816 51,405 35,211 34,447 16,605 16,958
Buildings and Jetties 84,466 83,914 72,895 71,448 11,571 12,466
Refining Plant 1,849,364 1,840,437 1,664,799 1,653,321 184,565 187,116
Capital Work in Progress 139,960 24,395 – – 139,960 24,395
Catalyst 57,648 54,779 34,261 33,622 23,387 21,157
Pipeline 60,034 58,730 44,273 43,333 15,761 15,397
Wiri Terminal 44,161 44,161 33,929 33,284 10,232 10,877
Equipment and Vehicles 57,598 51,846 48,228 44,883 9,370 6,963
Total 2,345,047 2,209,667 1,933,596 1,914,338 411,451 295,329

PARENT
Freehold Land & Improvements 51,816 51,405 35,211 34,447 16,605 16,958
Buildings and Jetties 84,466 83,914 72,895 71,448 11,571 12,466
Refining Plant 1,849,364 1,840,437 1,664,799 1,653,321 184,565 187,116
Capital Work in Progress 139,960 24,395 – – 139,960 24,395
Catalyst 57,648 54,779 34,261 33,622 23,387 21,157
Pipeline 60,034 58,730 44,273 43,333 15,761 15,397
Wiri Terminal 44,161 44,161 33,929 33,284 10,232 10,877
Equipment and Vehicles 55,139 50,477 46,778 44,593 8,361 5,884
Total 2,342,588 2,208,298 1,932,146 1,914,048 410,442 294,250

The latest Government Valuations of Land, Land Improvements and Buildings dated 1 September 2003 $000
Land 24,283
Land Improvements and Buildings 275,535
299,818

Note 6
INVESTMENT IN SUBSIDIARY
The Group holds 74.2% (2003: 74.2%) of the shares in Independent Petroleum
Laboratories Ltd whose principal activity is petro-chemical testing.

Note 7
FOREIGN EXCHANGE
The amounts owed by the Company and not covered by forward GROUP PARENT
exchange contracts or foreign currency balances comprise: 2004 2003 2004 2003
$000 $000 $000 $000

United States Dollars USD 623 358 623 358

Euro Dollars EUR 446 688 446 688
Australian Dollars AUD 15 2 15 2
Thai Baht THB 2,015 – 2,015 –
Great British Pounds GBP 94 134 94 134

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Notes to the Financial Statements continued

Note 8
FINANCIAL INSTRUMENTS
(i) Credit Risk
Financial instruments which subject the Company to concentrations of credit risk consist of cash, short term deposits and foreign
currency forward exchange contracts.
The Company places its surplus funds with trading banks and other financial institutions approved by the Board of Directors as
having the required credit rating. The Company further minimises its credit exposure by limiting the amounts placed with any one
institution at any one time.
The Company does not require collateral or other security to support financial instruments with credit risk; whilst it may be subject to
credit losses up to the notional principal or contract amounts in the event of non-performance by the counter parties, such losses
are not expected to occur.
(ii) Interest Rate, Currency Risk and Market Risk
(a) Currency
The Company only enters into foreign currency exchange contracts to manage payments of capital expenditure. The contracts in
place as at 31 December 2004 are disclosed in the table below (2003: see table below).
(b) Interest Rate
Short term deposits are repayable over varying periods with an average floating rate as disclosed in the table below.
(c) Market Risk
Electricity hedge contracts are in place at 31 December 2004 for 26% (2003: 37%) of the Company's estimated usage for 2005.
The nominal value of hedge prices contracted for at balance date for the Company, relating to the period from January 2005 to
30 September 2006 is $7.102 million (2003: $9.650 million).

GROUP 2004 PARENT 2004

Effective Balance Fair Effective Balance Fair
Interest Rate Sheet Value Interest Rate Sheet Value
$000 $000 $000 $000

Assets
Cash and Bank Balances 146 146 124 124
Short Term Deposits 6.50% 6,448 6,448 6.50% 6,448 6,448
6,594 6,594 6,572 6,572
Other Investments
Shares in Subsidiary – – 809 809
Term Liabilities
Term Loan 6.91% 45,098 45,098 6.91% 45,098 45,098
Liabilities
Bank Overdraft 40 40 40 40
45,138 45,138 45,138 45,138
Off Balance Sheet
Foreign Currency Forward Exchange Contracts 14,017 13,156 14,017 13,156
Electricity Hedge Contracts 7,102 – 7,102 –

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Notes to the Financial Statements continued

GROUP 2003 PARENT 2003

Effective Balance Fair Effective Balance Fair
Interest Rate Sheet Value Interest Rate Sheet Value
$000 $000 $000 $000
Note 8 continued
FINANCIAL INSTRUMENTS
Assets
Cash and Bank Balances 219 219 219 219
Short Term Deposits 5.13% 19,265 19,265 5.13% 19,265 19,265
19,484 19,484 19,484 19,484
Other Investments
Shares in Subsidiary – – 809 809
Liabilities
Bank Overdraft 64 64 34 34
64 64 34 34
Off Balance Sheet
Foreign Currency Forward Exchange Contracts 48,708 45,732 48,708 45,732
Electricity Hedge Contracts 9,650 – 9,650 –

All assets, liabilities and off balance sheet items are due to mature by July 2007.
(iii) Fair values were assessed:
(a) Cash and Bank Balances, Short Term Deposits, Accounts Receivable (Note 10) and Accounts Payable (Note 11)
The balance sheet carrying amount is equivalent to fair value.
(b) Term Loan - Unsecured
The balance sheet carrying amount includes accrued interest at 31 December 2004. The interest rate shown in the table above
is the weighted average. The Parent Company borrows under a negative pledge arrangement which requires certain
certifications and covenants. All these requirements have been met. The facilities in place are a working capital facility of
$25,000,000 and a cash advances facility of $125,000,000. Both facilities have been renewed at July 2004, the former for a
year and the latter for a three year period.
(c) Overdraft
The balance sheet carrying amount is equivalent to fair value. There is an offset facility in place between the dividend account
and the current account and therefore no overdraft facility fees or interest accrue.
(d) Foreign Currency Forward Exchange Contracts
Fair value is the difference between contract and market rates at year end.
(e) Electricity Hedge Contracts
The fair value of electricity price hedge contracts is extremely difficult to estimate because there are no "market quoted" forward
prices for electricity.

GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000
Note 9
CONSUMABLE STORES AND SPARES
Spares 10,159 10,359 10,159 10,359
Consumables 919 836 842 753
11,078 11,195 11,001 11,112

Spares are stated net of a provision for slow moving and obsolescent stock of $9,630,086 (2003: $9,243,750).
The Company purchases some items of stock which are subject to reservation of title clauses.

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Notes to the Financial Statements continued

GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000

Note 10
ACCOUNTS RECEIVABLE
Processing Fees 30,712 16,278 30,712 16,278
Product Distribution 2,383 2,278 2,383 2,278
Excise Duty (Note 11) 76,006 76,145 76,006 76,145
Other 4,026 2,137 3,788 2,009
113,127 96,838 112,889 96,710

No collateral is held over receivables, which are mainly due

from the Oil Marketing Companies (Note 8(iii)(a)).

Note 11
ACCOUNTS PAYABLE
Trade Accounts 23,257 13,373 23,126 13,126
Payroll Provisions (Note 12) 403 372 403 372
Payroll Accruals 2,825 2,317 2,825 2,317
Excise Duty (Note 10) 76,006 76,145 76,006 76,145
102,491 92,207 102,360 91,960

Changes to excise duties have no direct impact on the results of the

Company as they are collected from the Oil Companies and paid to
the NZ Customs Department on the same day each month.

Note 12
PAYROLL PROVISIONS
Provision for Long Service Leave and Retirement Bonuses 3,778 3,980 3,778 3,980
Less expected to mature within 1 year (Note 11) 403 372 403 372
3,375 3,608 3,375 3,608
Movements in the provision are as follows:
Total Provision as at 31 December 2003 3,980 3,780 3,980 3,780
Amounts charged against the provision (363) (121) (363) (121)
Increase in provision per actuarial methodology 161 321 161 321
Total Provision as at 31 December 2004 3,778 3,980 3,778 3,980

Note 13
CAPITAL COMMITMENTS
Commitments for capital expenditure not provided for in the accounts 32,337 53,444 32,337 53,444

Note 14
CONTINGENT LIABILITIES
Guarantee to The New Zealand Stock Exchange 75 75 75 75

The Company is a member of the ACC Partnership Programme, and has a

commitment to fund any long term injuries that may occur on site.
At year end there had been no such injuries. The maximum liability in
respect of this undertaking is $155,045 being twice the annual premium.

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Notes to the Financial Statements continued

GROUP PARENT
2004 2003 2004 2003
$000 $000 $000 $000

Note 15
LEASE COMMITMENTS
There is a liability for property rental of $500,000 (2003: $500,000)
per annum.
There are in place operating leases which are unable to be cancelled and
the commitments under these leases are as follows:
Within one year 191 118 188 115
Later than one but not later than two years 77 78 76 75
Later than two but not later than five years 19 91 19 91
287 287 283 281

Note 16
RELATED PARTY TRANSACTIONS
(i) Income
Income from Processing, Pipeline and Wiri Terminal is all derived from
the Oil Marketing Companies, whose shareholdings in the Company
are disclosed in the Shareholders information.
The proportion of income from each Company was:
BP 24% 23% 24% 23%
Caltex 22% 20% 22% 20%
Mobil 22% 22% 22% 22%
Shell 32% 35% 32% 35%

(ii) Operating Costs

The Parent Company has an Operating Service Agreement with Shell
International group of companies and a number of 'arms length'
transactions are conducted with Shell Companies and associates.
The proportions of costs in this category are:
Process Materials and Utilities 1% 1%
Administration and Other Expenses 6% 9%

(iii) Capital Expenditure

The Parent Company uses the Shell International group of
companies for technical and engineering expertise on various
capital projects including the Future Fuels project.
Costs incurred by the Parent Company in this category are:
Future Fuels Project 191 974
Other Capital Projects 340 173

(iv) Wiri Terminal

An option exists for the oil marketing Companies to purchase the
terminal at an agreed independent valuation of the market value of
the Companies interest.

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Notes to the Financial Statements continued

PARENT
2004 2003
$000 $000

Note 16 continued
RELATED PARTY TRANSACTIONS
(v) Independent Petroleum Laboratories Limited
Services sold to NZRC 2,227 2,018
Goods and Services sold to IPL 133 146

The shareholders of Independent Petroleum Laboratories Limited

advanced $100,000 to the Company for working capital purposes.
Both NZRC and BP's advances have been repaid in 2003.
Accounts Receivable from BP at 31 December – –
Accounts Payable to BP at 31 December (additional to advance above) – –

Since November 2001 a revolving credit facility was set up by NZRC

to assist IPL with its cash flow.
Interest paid by IPL to NZRC on this facility is as follows: 24 18
Balance owing by IPL to NZRC on the facility at 31 December 187 91

(vi) Insurance
40% (2003: 55%) of the Companies Material Damage and Business
Interruption Insurance is held by companies related to Shareholders.
These companies received 40% (2003: 55%) of the insurance
premium paid by the parent company.
The insurance companies and their percentage of the insurance are:
Jupiter Insurance Ltd (BP) 18% 18%
Solen Versichenungen AG (Shell) 13% 13%
Trader Insurance Limited (Caltex) 9% 9%
Ancon Insurance Co Ltd (Mobil) 0% 15%
40% 55%

Note 17
SEGMENTAL REPORTING
The Company operates in one industry - oil refining and distribution. All operations are conducted from Marsden Point.

Note 18
PENSION FUND
The Company contributes to a defined benefit pension scheme for eligible employees. This scheme was closed to new members at
31 December 2002 due to the Company's decision to move from providing a defined benefit scheme to a defined contribution scheme
from 1 January 2003. The last full actuarial review was dated 31 March 2004. At 31 December 2004, the Fund's Actuaries, Watson Wyatt
estimated the fund's assets to be in excess of its liabilities. The New Zealand Refining Company Staff Superannuation Plan has been in
effect since 1 January 2003 and is a defined contribution plan.

Note 19
EXPENSING OF COSTS RELATING TO FUTURE FUELS PROJECT
In 2002, in order to comply with Government driven stringent fuel specifications, the Parent Company set up a team to study the various
options which the Refinery could pursue in order to continue refining operations in the future. The costs of this were captured in capital
work-in-progress in 2002 and in the first part of 2003. At the April 2003 Board meeting of the Parent Company, approval was given to
proceed with the building of a Benzine Reduction Unit and a new Hydrodesulphuriser. Following evaluation, a total of $5.522M
preliminary costs were expensed in 2003 in accordance with the requirements of FRS-3.
55
 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Trend Statement
For the Years Ended 31 December

2004 2003 2002 2001 2000

$000 $000 $000 $000 $000
Operating Revenue
Operations 280,434 188,400 160,935 176,719 206,271
Other income 940 1,218 798 1,850 1,050
281,374 189,618 161,733 178,569 207,321
Costs
Operations 106,073 100,268 84,252 86,345 82,291
Net Depreciation 24,125 24,247 23,324 25,268 19,485
Other – 5,522 (3,943) 6,557 1,620
130,198 130,037 103,633 118,170 103,396
Earnings
Pre tax 151,176 59,581 58,100 60,399 103,925
Taxation 53,563 22,579 22,599 23,942 34,482
After tax 97,613 37,002 35,501 36,457 69,443
Dividends 38,400 26,400 54,000 12,000 60,000
Retained 59,213 10,602 (18,499) 24,457 9,443

Funds Employed
Share capital 24,000 24,000 24,000 24,000 24,000
Retained Earnings 354,114 294,879 284,257 302,795 278,316
378,114 318,879 308,257 326,795 302,316
Loan funds 45,098 – – – 1,550
Deferred tax /Provisions 13,425 11,710 11,138 8,537 6,577
436,637 330,589 319,395 335,332 310,443
Funds Utilised
Non current Assets 411,451 295,329 295,849 310,260 312,313
Working Capital 25,186 35,260 23,546 25,072 (1,870)
436,637 330,589 319,395 335,332 310,443

Note: For the purposes of showing the trends to the best advantage comparative figures for "Other Income" and "Depreciation" have been
adjusted to exclude expansion depreciation and expansion loan amortisation. Also catalyst depreciation for 2000 has been
transferred out of Operations Costs and into the depreciation figure to match with the 2001 and onwards accounting treatment.

2004 2003 2002 2001 2000

Share Statistics
Return on Average Shareholder Funds (%) 26 12 12 11 23
Earnings per Share ($) 4.06 1.54 1.48 1.52 2.89
Asset Backing per Share ($) 15.75 13.29 12.84 13.62 12.60
Dividend per Share (cents) 160 110 225 50 250
Dividend Paid ($) 38,400 26,400 54,000 12,000 60,000
Dividend Cover 2.5 1.4 0.66 3.04 1.16
Working Capital ratio 1.2 1.4 1.3 1.3 1.0

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T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Shareholder Information
As at 9 February 2005

Twenty Largest Shareholders Total Shares Held % of Total

and disclosure of interests of substantial security holders

1 BP New Zealand Holdings Ltd 5,677,716 23.66

2 Mobil Oil New Zealand Ltd 4,608,000 19.20
3 Shell New Zealand Holding Ltd 4,114,284 17.14
4 Emerald Capital Holdings Ltd 3,407,000 14.20
5 Caltex Oil (NZ) Ltd 3,045,849 12.69
6 Citibank Nominees (New Zealand) Ltd 101,277 0.42
7 Leveraged Equities Custodians Ltd 40,223 0.17
8 W.M.G. & J.J. Yovich 35,816 0.15
9 R.H.J. Jones, M.M. Jones & W.M.G. Yovich 34,337 0.14
10 Portfolio Custodian Ltd 33,649 0.14
11 P.H.P. Bayly & M.W. Crawford 30,000 0.13
12 P.H. Masfen & J.A.Masfen 30,000 0.13
13 Goldman Sachs JBWere (NZ) Ltd 26,192 0.11
14 E.A. Johnson, C.Johnson & W.M.G Yovich 22,643 0.09
15 Jimmy Huang 21,600 0.09
16 Custodial Services Ltd 20,381 0.08
17 J.W. Kent 20,000 0.08
18 University of Otago 20,000 0.08
19 D.M. Odlin 17,324 0.07
20 P.E. Murphy 16,600 0.07
21,322,891 88.85

Shareholder Spread
No. of Shares Shareholders Shares % Holder % of Shares
1-499 908 227,044 39 1
500-999 516 331,503 22 1
1,000-9,999 856 1,832,422 37 8
10,000 upwards 41 21,609,031 2 90
2,321 24,000,000 100 100

Geographical Spread
No. of Shares Shareholders Shares % Holder % of Shares
Auckland (Greater) 667 4,270,813 30 18
Wellington 341 17,998,005 15 75
Whangarei 220 385,115 9 1
Other North Island 521 642,684 22 3
South Island 471 576,586 20 2
Overseas 101 126,797 4 1
2,321 24,000,000 100 100

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 T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Share Price Performance

NZRC Share Price vs NZSE40 Capital Index – 1 Year

33
2,900
31

2,700
29

27 2,500
NZRC Share Price NZ$

25
2,300

NZSE 40
23
2,100
21
1,900
19

1,700
17

15 1,500
Jan 04 Mar 04 May 04 Jul 04 Sep 04 Nov 04 Jan 05

NZRC Share Price vs NZSE40 Capital Index – 5 Years

35
2,900

30
2,700

25
2,500
NZRC Share Price NZ$

20
2,300 NZSE 40

15
2,100

10
1,900

5 1,700

0 1,500
Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05

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T H E N E W Z E A L A N D R E F I N I N G C O M P A N Y L I M I T E D

Suppliers
For the Years Ended 31 December

The Group deals with many local, national and international suppliers to provide the materials and services required to carry on the business.
A very good relationship exists between the suppliers and the Group. This is attributable in the main, to the Parent Company's excellent
record over the years of ensuring that payment for services, supplies and contracts are made within the agreed contractual payment terms.

The costs of all goods, materials and services purchased by the Group for the past five years are:
2004 2003 2002 2001 2000
$000 $000 $000 $000 $000
215,211 99,788 67,663 67,802 62,050

These costs include materials and contractor labour for capital projects.

Suppliers representing 10% or more of total purchases in the period are:

Transfield Worley N.Z. Ltd 17% (This includes all onsite contractors who are managed by TWNZ on the Refinery's behalf).

The Top Ten Suppliers by Spend in 2004 were:

Transfield Worley Engineering and Maintenance Services
Foster Wheeler Engineering, Procurement and Management of Future Fuels Project
Mercury Energy Electricity supply
Robt Stone & Co Future Fuels Project - Main Mechanical Contract
Whitaker Civil Engineering Ltd Future Fuels Project - Civil Contract
UOP LLC Purchase of Catalyst and Consultancy Services
UniThai Shipyard & Engineering Future Fuels Project - Fabrication of Preassembled Units
Thomassen Compression Systems Future Fuels Project - Compressors
Marsh Ltd Insurance Arranger
FH Bertling Future Fuels Project - Shipping & Freight Services

Taxes Paid
For the Group for Years Ended 31 December

2004 2003 2002 2001 2000

$000 $000 $000 $000 $000

Fringe Benefit Tax 536 423 350 354 324

Goods & Services Tax 11,779 12,104 13,126 13,086 17,784
Income Tax 47,483 19,000 18,846 22,900 24,234
Non Resident Withholding Tax 40 78 80 54 28
PAYE 8,505 7,348 6,925 6,796 6,983
Rates 396 323 198 199 205
Withholding Tax on Pension Contributions 981 884 308 268 254
69,720 40,160 39,833 43,657 49,812

59
 40 Years on...
In 2004 the New Zealand
Refining Company had been
refining oil and supplying the
New Zealand market for the
past 40 years. This was cause to
celebrate indeed and to reflect
on the history and
achievements of the Company
over the years.

… and celebrate we did. Two

parties were held at the Kamo
Club to ensure that all NZRC
and IPL staff and pensioners
would be able to attend. Both
occasions were a huge success,
an excellent meal, an
entertaining “Helen Clark”
impersonator and dancing to
the Larry Morris Band adding to
the special atmosphere that
prevailed.

The Company, however, wanted

to share its celebrations with the
public also. In September the
Refinery opened its gates and
took members of the public on
guided bus tours of the site.
Over 10,000 people turned up
on the day and the volunteer
Refinery staff and Lions club
members were kept very busy.
There was a wide range of
entertainment to keep the
public happy whilst they
awaited their turn in the queues
for the buses – inflatables such
as the “Titanic”, Old
MacDonald’s Farm for the
children, Cave Rider excursions,
vintage and hot rod cars,
demonstrations of kitchen fire
safety and the rescue helicopter,
a continuous variety show with
singing, dancing and comic acts
and many, many more items.
A gold coin donation was
requested for the tours, the
Cave Rider and the food and
drinks. Everything else was
free. All donations collected on
the day were given to the North
Haven Hospice – a total of
$10,500.
Calders Design and Print Co. Whangarei