fuelling new Zealand’s future

OurRefiningBusiness

2010fuelling ConneCtions

contents

01 our company profile

02 Our timeline

03 Our position in New Zealand’s fuel supply chain

04 our refinery

06 understanding our results

06 Income

09 Subsidiaries

09 Production

10 Growth

11 Distribution

12 Reliability

13 Energy

14 Safety

14 People

16 Communication

17 Community

The New Zealand Refining Company is New Zealand’s only oil refinery and is proud to be a strong contributor to both the local community and the national economy.

Situated at Marsden Point near Whangarei, the refinery was commissioned in the 1960s and has since earned a reputation as one of Asia Pacific’s safest and most reliable refineries.

Today the refinery processes a wide range of crude oil types sourced from domestic and offshore markets to produce premium and regular petrol, diesel, jet fuel, fuel oil, roading bitumens and sulphur.

Following a significant upgrade and expansion in the 1980s and continued investment in newer technologies in the last 20 years, the refinery now has a crude oil capacity of 135,000 barrels a day.

This allows NZRC to supply more than 70 per cent of all fuel products for the New Zealand market, with almost half of all fuel production sent to Wiri in South Auckland via a purpose-built 170 kilometre pipeline, for storage and subsequent distribution.

The petroleum industry was deregulated in 1988. Today BP, ExxonMobil, Aotea Energy Limited (operating as Greenstone Energy) and Chevron are key customers and significant shareholders in the refinery. The remaining shareholders, numbering approximately 3,800, represent a mix of corporate and private investors.

NZRC and its staff are strongly committed to being a good neighbour and protecting the pristine local environment, forming strong relationships with government, Iwi, community, business and conservation groups to achieve this goal. All operations are carefully managed to avoid, remedy or mitigate any adverse effects on the environment, through environmental monitoring certified to the ISO 9001 and ISO 14001 standard.

Striving to always improve safety and reliability, NZRC has commissioned two significant projects in recent years – Future Fuels in 2005 and Point Forward in 2009. The Future Fuels Project has allowed the refinery to produce cleaner fuels by providing the latest plant and equipment necessary to remove sulphur from diesel and benzene from petrol.

Point Forward is also a significant step forward, including a substantial plant upgrade that has increased overall productivity and grown our business by 15 per cent.

With a staff of around 320 and an extended team of local contractors, The New Zealand Refining Company is committed to delivering on its promises and achieving its vision of Fuelling New Zealand’s Future.

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01The New ZealaNd refiNiNg compaNy limiTed

international markets

Feedstock purchase and delivery to NZRC

Wiri terminal

Truck loading

Exports and bunker fuel

Product coastal

distribution

Product pipeline to Wiri

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Refining

our position in New Zealand’s fuel supply chain

28% 72%

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Coastal terminals

New Zealand product market (50 Mbbls) Petrol (41%), Jet Fuel (16%), Diesel (35%),

Fuel Oil (6%), Bitumen (2%)

Imported product NZRC product

Notes: Values and percentages are actual NZRC production and market estimates for 2010. Values include petrol, diesel, jet fuel and kerosene, fuel oil and roading bitumen.

NZRC NZ oil companies International companies

The company is responsible for processing feedstock (crude oil and blendstock) into high quality transport fuels for our customers. Close to half of all finished product is distributed via the Refinery Auckland Pipeline (RAP) with the remainder distributed via shipping to ports and by road to the rest of New Zealand.

our timeline

2011Board agrees $23 million for a Front End Engineering Design (FEED) report, looking at the opportunity to grow NZRC’s share of the domestic petroleum market.

2005Future Fuels Project commissioned to allow for production of ‘clean’ fuels.

1964Marsden Point refinery officially opened and first fuel produced.

1961New Zealand Refining Company Limited is formed.

2009Point Forward Project

commissioned, increasing the refinery’s overall production

capacity by around 15 per cent.

1987Petroleum Sector Reform Act is

introduced, leading to deregulation.

1985Refinery successfully completes a five-month

shut down to make the tie-ins to the expansion.170 kilometre long pipeline to Wiri is completed.

1979 Political unrest in Iran triggers

second oil shock, with price increase from USD13 to USD32.

Expansion of Marsden Point refinery approved.

1969Progressive expansion is

proposed but put on hold by Government.

1962Building begins on original

Marsden Point Oil Refinery.

1956NZ Government investigates the viability of an oil refinery

in New Zealand.

1999Establishment of the Independent Petroleum

Laboratory Ltd on site at Marsden Point.

2000New pumping station built at Wellsford to

support increased capacity of RAP pipeline.

1973World suffers first oil shock, with price increase from USD3 to USD20 per barrel.

1980International loans raised for expansion project.

1982Wiri terminal and RAP (Refinery to Auckland Pipeline) added to expansion project.Contract for expansion finally signed.

1986Expansion completed at a cost of NZ$1.84 billion.

1988Newly structured deregulated environment comes into being. Negotiation begins with global oil companies and processing agreements finalised.

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01 JettiesThe refinery has two jetties for berthing crude oil and product ships, carrying up to 125,000 tonnes of oil. The ships berth alongside the jetties and crude oil is pumped off or product is loaded onto ships.

02 Jetty threeThis jetty, commissioned during 2009, is used to berth smaller ships (barges), which are capable of carrying up to 5,000 tonnes of fuel products. From this jetty finished product is loaded onto a barge which supplies directly to cruise liners and other ships in the port of Auckland.

03 Crude oil storageThe crude pumped from the ships berthed at the jetties is discharged into a number of oil storage tanks. Our largest tank holds 80 million litres of crude.

04 a BlockThis block of refining units includes the crude distillation unit and naphtha work-up plants. The first stage in the refinery process is distillation, a process which separates the crude oil into the different fractions or components. These are naphtha (for producing petrol), kerosene, diesel components and a residue stream. These streams then pass to other units for further processing. There are two distillation units which between them have the capacity to process 18,000 tonnes of crude per day (around 135,000 barrels per day).

The $191 million Point Forward Project, commissioned in 2009, increased the capacity of one of the distillation units from around 60,000 to 95,000 barrels per day.

The naphtha from the initial distillation process is too low in octane for direct use in petrol. We need to make petrol at 91 and 95 octane to meet the specifications. After removal of sulphur, the naphtha is passed through reactors filled with platinum catalyst and the low octane naphtha is converted to high octane platformate. A handful of platformer catalyst has a surface area equal to about three football fields.

05 desulphurisationCrude oil contains sulphur which must be removed to produce clean low sulphur products that meet New Zealand’s high quality specifications. The refinery has three desulphurisation units which remove sulphur from diesel components and kerosene in catalyst filled reactors, producing on-specification diesel and jet fuel.

The Future Fuels plant was a $180 million investment commissioned in 2005. The plant removes sulphur from diesel to below 10 parts per million, and reduces benzene in petrol to meet New Zealand’s world class clean fuel specifications.

06 HydrocrackerThe hydrocracker is part of a number of processing units to upgrade the residue stream from the distillation units into higher value products. The hydrocracker converts most of the residue streams from the distillation units to higher value petrol, jet fuel and diesel components. This upgrading is by means of a catalytic cracking process in four large reactors in the presence of hydrogen at a pressure of around 140 bar. Hydrogen is produced by reforming refinery gas streams in a catalytic process. The unconverted part of the residue stream is blended into fuel oil products.

07 sulphur recovery unitThree sulphur recovery plants process the H2S rich gas recovered from the refining process. This includes a $30 million SCOT unit (Shell Claus Offgas Treatment) to lower the sulphur dioxide emissions to the environment and to increase sulphur recovery to 99. 8 per cent. The recovered sulphur is sold to Ballance Agri-Nutrients for use in fertiliser production.

08 Control roomThe refinery operates 24 hours a day and is controlled by shift teams of operators working from the control room. From their computer screens the panel operators monitor and control the many valves, pumps and equipment required for the refining operation.

09 Blending and products storageThe process units produce a number of component streams that are routed to tankage. These components are blended into on-specification final products that are stored in product tanks before being pumped via the pipeline or loaded onto ships for distribution.

10 PipelineThe pipeline to Auckland runs underground from the refinery to a terminal at Wiri near Auckland International Airport. Petrol, jet fuel and diesel are sent down the pipeline in sequential batches using pumps at both the refinery and two intermediate pump stations located at Wellsford and Kumeu.

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03 WHAT IS THE ‘MARGIN’?

This is a notional refining margin generated by NZRC and is calculated as the typical market value of all the products produced, minus the typical market value of all the feedstock processed. When divided by the volume of feedstock processed, it is expressed in dollars per barrel (bbl), typically USD per bbl because international prices are quoted in USD. The market value of products is determined by using quoted prices for the products in Singapore, which is the trading hub for Asia-Pacific. To this is added the typical freight cost to New Zealand (import parity value) plus any product quality premiums. The value of feedstock is determined by using the market value for crude oil and other feedstock at the point of purchase, plus the typical cost of freight to the refinery (landed value).

Singapore and NZRC Refining Margins, US Dollars per Barrel

* BP INDICATOR MARGIN SINGAPORE AS DEFINED ON BP WEBSITE (NOTE: BP HAS RECENTLy CHANGED THE CALCULATION OF THEIR INDICATOR MARGIN).

The indicator margin is a simplified margin for a generic complex refinery in Singapore, with simplified product yields and Dubai as only feedstock. NZRC’s margin follows the same trend as the indicator margin, but is different due to NZRC’s location and differences in feedstock/products mix.

04 HOW IS THE REFINERY’S INCOME CALCULATED AND WHAT FACTORS IMPACT THE COMPANY’S INCOME?

The processing fee is set at 70 per cent of the refinery margin generated, subject to a fee floor and margin cap. This reflects that NZRC’s customers bear the risks and associated costs of crude purchasing, the finance and currency costs and risks associated with maintaining crude, feedstock and product inventories, shipping and demurrage risks and guarantee a minimum processing fee. NZRC’s income for the period is then converted to New Zealand Dollars using the exchange rate for that period.

The processing fee formula is:

Processing fee (NZD) = 70 per cent x margin (USD/bbl) x feedstock processed (bbl) / exchange rate (USD/NZD).

The processing fee is therefore impacted by product and feedstock prices in the international markets, volume of feedstock processed and the exchange rate.

NZRC’s processing fee income is the sum of the customers’ processing fees. Each customer’s processing fee is different because they each process different volumes and types of feedstock, and make different volumes of products.

Exchange Rate, US Dollar vs NZ Dollar

incomeSUPPORTED By OUR STRATEGy: ROBUST PROFITABILITy – DELIVERING IN A VOLATILE WORLD

01 WHERE DOES THE COMPANY GET ITS INCOME FROM?

The company has two main operating income streams – processing fee income and pipeline fee income (part of the distribution income). Processing fees are paid by NZRC’s customers for refining their crude oil and other feedstock into final products, and are set at a percentage of the refining margin (see question 03) that is generated by NZRC. Pipeline fees are paid by NZRC’s customers for pumping refined products via NZRC’s pipeline to Auckland, and are set at a negotiated price per volume pumped. Fees are also charged for other services, such as for producing special grade products and for blending of imported components.

The crude oils and feedstocks that are refined into transport fuels at Marsden Point are owned by the customers.

Total operating income generated by the Group for the year ended 31 December 2010 was $288 million (2009: $247 million), analysed as follows:

Sources of Income

Other Income (2010 $38.4m, 2009: $36.6m)

02 WHO ARE NZRC’S CUSTOMERS?

NZRC’s customers are the local subsidiaries of BP, Chevron (marketing under the Caltex brand), ExxonMobil (marketing under the Mobil brand) and Greenstone (marketing under the Shell brand). Greenstone has bought Shell’s refining and marketing business in New Zealand and continues to market under that brand. These customers all refine crude oil at NZRC under separate processing agreements. NZRC also sells liquid sulphur to Ballance Agri-Nutrients and carbon dioxide to Air Liquide, both products being by-products from the processing of crude oil.

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2009: 85% 2010: 87%OIL REFINING

2009: 15% 2010: 13%OTHER

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2009: 73% 2010: 75%DISTRIBUTION REVENUE

2009: 18% 2010: 17%WIRI RENTAL INCOME

2009: 8% 2010: 7%OTHER

2009: 1% 2010: 0%GAIN ON INVESTMENT PROPERTY

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NZRC MARGIN NZRC CAP BP INDICATOR MARGIN (SINGAPORE)*

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05 WHY DOES THE PROCESSING AGREEMENT BASE THE COMPANY’S REVENUES ON A SHARE OF THE REFINING MARGIN?

Toll processors often only receive a flat fee for processing customers’ feedstock. The processing agreement that NZRC has with its customers represents a “gain sharing” arrangement whereby there is an incentive for NZRC to maximise the value from the crude oil and other feedstock that the customers provide.

The principles of the processing fee formula were established in 1995. It is based on sharing the refining margin according to the risks and costs that NZRC and the customers respectively bear within the total supply chain.

NZRC’s processing fee is calculated as 70 per cent of the notional refining margin. This reflects that NZRC’s customers bear the risks and associated costs of crude purchasing, the finance and currency costs and risks associated with maintaining crude, feedstock and product inventories, shipping and demurrage risks and guarantee a minimum processing fee. The processing arrangements are intended to provide NZRC with sufficient funds for new investments and provide the user companies with sufficient incentive to optimise their use of NZRC facilities.

The current arrangements have stood the test of time enabling NZRC to invest significantly, while performing strongly on the NZ Stock Exchange and encouraging our customers to fully utilise the facilities. We review the arrangements to ensure they remain reasonable to shareholders and sustainable. In 2009 a review was carried out by consultants Purvin & Gertz Inc. They concluded that the processing fees charged by NZRC at 70 per cent of the gross margin (with defined minimum total fees and maximum gross margin cap) have not been unreasonable to NZRC’s shareholders, relative to the risks borne by NZRC and their customers.

A review of processing arrangements was also carried out in 2010 by the Independent Directors and presented to the Board.

The opinion expressed in that review was that management had exercised an appropriate degree of professional care and diligence to ensure that the processing fee and other contractual arrangements remain in the best interests of the Company. In their opinion, the processing agreements support the on-going competitiveness of the Company and provide shareholders with commensurate returns over the business cycle.

Management is tasked with keeping the processing fee and other contractual arrangements under review, to ensure that they remain in the best interests of the Company. The Independent Directors will review the status of the processing arrangements with management annually.

06 WHAT IS THE MARGIN CAP AND THE FEE FLOOR AND WHY HAVE THEM IN THE PROCESSING AGREEMENT?

The margin cap applies for each customer separately and is set at a maximum of USD9 per barrel per calendar year. The floor provides income protection when refinery margins and/or the exchange rate are unfavourable. The fee floor comes into effect if the total processing fee for a calendar year does not exceed a minimum value. This value will be close to NZ$118 million for 2011 and is subject to annual Producers Price Index (PPI) and Labour Cost Index (LCI) based escalation.

07 HOW DOES THE VOLATILITY OF THE INTERNATIONAL OIL MARKETS AFFECT THE COMPANY?

Up and down movements of crude oil prices are often mirrored by product price movements, hence crude price volatility may not directly affect the refinery margin. The movement of product prices relative to oil prices affects the refinery margin. While crude oil price movements are fundamentally driven by supply and demand for crude oil, refinery margin movements are fundamentally driven by supply and demand for refining capacity. Because NZRC’s margin is based on Singapore prices plus freight plus premiums for quality, changes in international freight rates and in quality premiums also affect NZRC’s margin.

08 WHO ARE THE COMPANY’S COMPETITORS?

NZRC competes against products imported to New Zealand ports. Most imports are sourced out of Singapore, Japan, South Korea and Taiwan, and therefore NZRC competes with export refineries in the Asia-Pacific region.

subsidiariesSUPPORTED By OUR STRATEGy: ROBUST PROFITABILITy – DELIVERING IN A VOLATILE WORLD

09 DOES THE COMPANY HAVE A FINANCIAL INTEREST IN ANY OTHER ENTITIES?

The Independent Petroleum Laboratory Limited (IPL) was established in July 1999 and is 75 per cent owned by NZRC. It is New Zealand’s largest fuel testing laboratory.

IPL operates as an independent laboratory, utilising knowledge and technology to provide sound, innovative solutions to the analytical needs of the petrochemical and related industries.

IPL provides a wide range of the fuels, biofuels and environmental analysis and testing to a wide range of industry clients based in New Zealand and the South West Pacific. Further information is available on the web-site at: www.ipl.co.nz

Production SUPPORTED By OUR STRATEGy: SUPPORTING NZ’S GROWTH – NEW ZEALAND’S SUPPLIER OF CHOICE

10 HOW MANY BARRELS OF CRUDE DOES THE COMPANY PROCESS IN A YEAR?

NZRC processes typically between 37 and 42 million barrels of crude oil and other feedstock per year. The actual volume in any one year depends on the effect of shutdowns and the type of feedstock.

Intake 2010 2009 2008 2007 2006

Intake (bbls ‘000) 38,952 37,935 39,194 36,865 38,766

Intake (tonnes ‘000)Processing Intake 4,998 4,807 4,987 4,641 4,858Blending Intake 197 267 241 262 292

TOTAL INTAkE 5,195 5,074 5,228 4,903 5,150

12 HOW BIG IS A BARREL OF CRUDE?

One barrel is 159 litres, or approximately three times larger than the average fuel tank of a car.

One bbl of crude typically makes:

11 WHERE DOES THE CRUDE OIL COME FROM?

NZRC’s refinery configuration allows for a relatively flexible crude diet. Just over half of the crude oil comes from the Middle East (typically Saudi Arabia, United Arab Emirates and Qatar) and the rest from Asia-Pacific (Malaysia, Indonesia, Brunei, Australia and New Zealand). Some crude oil from other regions (Africa, Europe and Russia) is also received. New Zealand produced crude oil is more suitable for refineries in Australia so NZRC processes only some of the New Zealand produced crude oil.

2010

2010: 55%MIDDLE EAST

2010: 40%ASIA

2010: 3%AUSTRALIA

2010: 2%NEW ZEALAND

Consumed as Fuel

0.8% NAPHTHA

34.1% DIESEL

2.3% BITUMEN

4.5% CONSUMED AS FUEL

PETROL 29.3%

JET FUEL 20%

FUEL OIL 8.7%SULPHUR 0.3%

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13 WHAT PRODUCTS ARE MANUFACTURED BY THE COMPANY?

NZRC produces petrol, diesel fuels, jet fuel and fuel oils as transport fuels. Other products include roading bitumen, sulphur and naphtha (exported as petrochemical feedstock). Some of the carbon dioxide produced is recovered for use in soft drinks.

14 HOW MUCH PRODUCT IS MANUFACTURED IN A YEAR?

Outturn (tonnes ‘000) 2010 2009 2008 2007 2006

Mogas (Petrol) 1,332 1,386 1,484 1,413 1,477

Light Naphtha 34 13 28 4 10

Jet Fuel and Kerosene 990 869 892 839 911

Gasoil (Diesel) 1,772 1,581 1,615 1,581 1,659

Fuel oil 529 695 674 549 540

Roading bitumen 148 119 113 131 130

Sulphur 32 38 38 32 30

growthSUPPORTED By OUR STRATEGy: SUPPORTING NZ’S GROWTH – NEW ZEALAND’S SUPPLIER OF CHOICE

15 HOW DO WE GROW OUR BUSINESS?

Our aim is to be New Zealand’s supplier of choice for transport fuel products and to grow with our customers. This can be achieved through innovation and understanding their strategic interests, so that potential synergies can be captured and new opportunities tapped.

As New Zealand’s only oil refinery we have the opportunity to grow as demand grows. Our target is to supply up to 80 per cent of New Zealand’s transport fuel (diesel, petrol, jet fuel). The commissioning of the Point Forward expansion in 2009 has grown our transport fuels production by around 15 per cent and we now supply more than 70 per cent of the country’s transport fuel.

We will continuously improve our competitive position versus imports and develop robust options to grow our business further in the future.

distributionSUPPORTED By OUR STRATEGy: SUPPORTING NZ’S GROWTH – NEW ZEALAND’S SUPPLIER OF CHOICE

19 HOW ARE PETROL AND OTHER PRODUCTS MANUFACTURED BY THE COMPANY DISTRIBUTED THROUGHOUT THE COUNTRY?

Petrol, diesel and jet fuel are pumped via the Refinery to Auckland Pipeline (RAP) to a terminal at Wiri in South Auckland to feed Auckland and parts of the Waikato. Petrol and diesel are pumped to a truck-loading terminal adjacent to the refinery which supplies Northland. Petrol, diesel, jet fuel, fuel oil and bitumen are shipped to ports via coastal tankers to supply the rest of New Zealand. Naphtha and some fuel oil are exported. Sulphur and some bitumen are loaded into road trucks at the refinery.

Distribution (Mass %) 2010 2009 2008 2007 2006

Pipeline 45.2 46.7 46.5 50.2 47.4

Truck Terminal 4.5 4.8 4.7 5.2 5.0

Coastal Shipping 46.5 42.3 43.3 40.4 43.4

Exports 2.1 5.1 4.2 2.5 2.5

Other 1.7 1.1 1.3 1.7 1.7

Coastal Shipping Destination for 2010 (%)

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20 WHAT IS THE RAP?

The RAP (Refinery to Auckland Pipeline) is owned and operated by NZRC. It is a multi-product pipeline that runs mostly underground to a terminal at Wiri, near Auckland International Airport. It operates continuously and product batches are pumped in succession. The RAP supplies most of Auckland’s petrol, diesel and jet fuel needs, and additional product is trucked from Wiri into the Waikato region.

21 HOW MUCH PRODUCT CAN BE PUMPED THROUGH THE RAP PER HOUR?

The throughput is typically around 320,000 litres per hour or a maximum of 420,000 litres per hour. That is enough fuel to fill the tanks of 8,000 cars every hour.

Pipeline Revenue ($ million) and Throughput (Mbbls)

16 WHAT IS THE GROWTH PROjECT?

The Company is continually looking at strategic growth opportunities to take the business forward and improve its share of the New Zealand domestic market for transport fuel products. As part of the Company’s strategic plan, management has been looking at the attractiveness of investing $400-$500 million in a significant growth project based on materially increasing the Company’s share of the domestic gasoline (petrol) market from circa 50 per cent to 75-80 per cent. The Directors have agreed to provide funding of $23 million for the development of a Front End Engineering Design (FEED) report which is expected to be completed and submitted to the Board in quarter one 2012.

17 IF THE PROjECT IS APPROVED HOW LONG WILL IT TAKE TO COMPLETE?

Should the Board decide to proceed then we expect the construction phase to take around three years with the first stage of commissioning to be completed by late 2015.

The Front End Engineering Design report will determine what resources will be needed for the construction phase of the project. Over the next 12 months management will be pulling together further detail for this report and expect to have this completed for presentation to the Board in quarter one 2012.

18 HOW MUCH OF THE COUNTRY’S FUEL IS PRODUCED AT NZRC?

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PETROL JET FUEL DIESEL TOTAL

NZ FUEL DEMAND DATA TO 2009 FROM MINISTRy OF ECONOMIC DEVELOPMENT’S ENERGy DATA FILE AND 2010 FUEL DEMAND ESTIMATED By NZRC.

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Reliability SUPPORTED By OUR STRATEGy: LEADING IN RELIABILITy, SAFETy AND ENvIRONMENT – ASIA PACIFIC’S BEST

22 HOW MANY DAYS IN A YEAR IS THE PLANT AVAILABLE FOR PROCESSING?

NZRC operates around the clock throughout the year. Some shutdowns of operating units take place from time to time for maintenance and other activities such as catalyst regeneration or replacement.

Operations staff and engineers continually monitor the performance of all units operating within the plant and plan for shutdowns over a period of several years. Planning for shutdowns is complex. All areas of the business must be mobilised to ensure that all planned maintenance (and any emerging work) is completed safely, on time and within budget, while ensuring that sufficient product stocks are held to meet customer demand during the shutdown period.

The following shutdowns are planned for the next four years:

2011 2012 2013 2014 Quarter Quarter Quarter Quarter

Crude Distiller - 1 3 -

Hydrocracker - * - 2

Platformer Catalyst - 1 3 -

Diesel Hydrotreater - 1 3 -

*TOP BED SKIM: SHORT DURATION SHUTDOWN TO REMOvE CATALyST CONTAMINANTS

energy SUPPORTED By OUR STRATEGy: ROBUST PROFITABILITy – DELIVERING IN A VOLATILE WORLD

24 WHERE DOES THE COMPANY GET ITS ENERGY FROM?

NZRC consumes energy in the forms of electricity, imported natural gas and fuels derived from crude oil – refinery gas, fuel oil and asphalt.

Electricity is supplied via the New Zealand grid and is used to drive pumps, compressors and other electrical equipment. The refinery’s demand for electricity is approximately 32 MW, which makes us one of the larger users of electricity in New Zealand.

We also use a variety of fuels, mostly in furnaces, to provide the heat and steam required for the refining operation. The refinery consumes approximately 1,000 tonnes of fuel per day. Sources include fuel gases generated in the processes, asphalt and fuel oil and some natural gas.

Refinery Energy Profile

2010

2010: 64%REFINING GAS

2010: 16%ELECTRICITY

2010: 10%NATURAL GAS

2010: 5%FUEL OIL

2010: 5%ASPHALT

25 HOW IMPORTANT IS ENERGY EFFICIENCY?

Energy efficiency improves our competitiveness against Asian peer refiners, contributes to an improved financial performance and reduces our environmental impact.

We are committed to making energy efficiency improvements under the Negotiated Greenhouse Agreement (NGA) we have with the Government – and we continue to meet our targets set out in the NGA pathway.

26 HOW WILL THE EMISSIONS TRADING SCHEME IMPACT OUR BUSINESS?

Refining crude oil into fuel products is an energy intensive process. Our energy use is reflected in the direct emissions of greenhouse gas from our site and the indirect emissions from the consumption of thermally generated electricity.

In 2003, NZRC signed a Negotiated Greenhouse Agreement (NGA) to minimise our greenhouse gas emissions and assist New Zealand to meet its Kyoto protocol commitments. In 2010 New Zealand introduced an Emissions Trading Scheme (ETS) from which we are exempt due to the NGA. We are required to continue to improve our energy efficiency within a defined pathway with the ultimate aim of reducing the amount of greenhouse gas discharged for every litre of fuel produced.

A review of the NGA is scheduled for 2012 to agree the pathway through to 2022. We have committed to achieving and maintaining best practice in energy efficiency, a process started in 1996 when NZRC signed a voluntary agreement with the Government.

23 HOW DOES THE COMPANY ENSURE PLANT RELIABILITY AND INTEGRITY?

NZRC has a comprehensive asset reliability and integrity management focus which has, over the years, continued to be highlighted as a key business strategy. Continuous improvements have been achieved by developing and improving a number of reliability, inspection and maintenance strategies. In addition, we have a project team focused on Reliability Integrity and Process Safety (RIPS+) and our process specialists are carrying out studies to identify and improve our understanding of major hazards for the business. This focus will improve our reliability, lead to a safer plant, increased operational availability, improved environmental management and better morale.

Adopting a multidiscipline team approach to asset management and operational excellence has enabled us to continue to deliver world-class results.

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People SUPPORTED By OUR STRATEGy: PEOPLE AND PERFORMANCE – BEING AN EMPLOyER OF CHOICE

28 NZRC’S AIM IS TO BE AN EMPLOYER OF CHOICE. WHAT DOES THIS MEAN?

Being an Employer of Choice means that talented people seek you out, give you their best performance, and stay with you. An Employer of Choice has a compelling characteristic that makes them stand out: – their brand is distinctive and recognisable, and they have a track record as a successful organisation. An Employer of Choice provides challenging and stimulating careers for employees while offering highly competitive employment conditions – including remuneration, holidays, and development opportunities.

29 WHAT STEPS ARE WE TAkING TO BECOME AN EMPLOYER OF CHOICE?

NZRC’s human resources strategy is designed to put in place all the elements that would make us New Zealand’s Employer of Choice for talented and motivated people. We are focussed on improving our visibility in the employment marketplace, in particular through our partnerships with leading New Zealand universities.

We benchmark our remuneration and other employment conditions against our peers to ensure we remain competitive, and we offer financial incentives for stand-out individual and company performance. NZRC offers opportunities for professional and personal development to all its people, and we provide both technical and management career paths for people who have the right mix of skills.

We are aiming to make the quality of our leadership our unique point of difference by providing employees with high quality leadership, and giving future leaders the chance to develop their skills with one of New Zealand’s most successful companies.

safety SUPPORTED By OUR STRATEGy: LEADING IN RELIABILITy, SAFETy AND ENvIRONMENT – ASIA PACIFIC’S BEST

27 WHAT ARE WE DOING TO IMPROVE OUR SAFETY PERFORMANCE?

For us, safety is about our people and we are actively engaging our people to ensure our vision of Safely Home, Every Day is one we all share. Communicating our health and safety messages and expectations effectively remains a priority. We are continuing to develop our safety leadership capability and to demonstrate visible leadership commitment and show through action that health and safety has priority in all the things we do. We are maintaining a concentrated focus on ensuring that the processes we use to understand the health and safety related risks that arise from operating the facility are robust and that the systems we use to manage the risks are effective.

We are engaging with other organisations and are active in best practice health and safety leadership groups at both national and regional levels, giving us the ability to positively influence as well as learn from others.

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Community SUPPORTED By OUR STRATEGy: DELIVERING ON OUR PROMISES – DEVELOPING MUTUAL TRUST, UNDERSTANDING AND SUPPORT

31 HOW DOES THE NEW ZEALAND REFINING COMPANY SUPPORT THE COMMUNITY?

We are committed to contributing to the economic, environmental and social sustainability of our local community and look to develop mutual partnerships where we can learn from each other, through dialogue, sharing of knowledge, expertise and labour, endorsement, grants and/or gifts in kind.

We have an established relationship with local Iwi and work with them in a spirit of Kaitiakitanga (guardianship) to help preserve our local environment. In 2010 we joined other local businesses in providing funding for the much needed refurbishment of Takahiwai Marae. As part of a long-standing commitment to helping young Maori achievers we provided funding to our Patuharakeke scholars to enable them to continue with their studies.

We support water safety through ongoing funding for the Ruakaka Surf Lifesaving Club for the purchase or replacement of essential life saving equipment. NZRC also funds the day-to-day operations of the Whangarei Volunteer Coastguard.

CommunicationSUPPORTED By OUR STRATEGy: DELIVERING ON OUR PROMISES – DEVELOPING MUTUAL TRUST, UNDERSTANDING AND SUPPORT

30 WHAT AWARDS HAS THE NEW ZEALAND REFINING COMPANY WON?

Awards are both recognition for work well done and a benchmark of how well our business is performing.

Over the last 18 months we have been recognised with a number of awards for our environmental, leadership performance and the quality of our communication with shareholders. Most notably, we are one of only 45 Top Companies for Leaders in the world, as recognised by recruitment consultancy Hewitt Associates, RBL Group and Fortune Magazine. With around 320 full-time employees, NZRC was the smallest winning company in the survey, yet we sit alongside global companies including General Electric, Coca Cola and Proctor & Gamble.

In 2010 the quality of our communication to shareholders was again recognised. NZRC took the top prize for corporate annual reporting at the New Zealand Institute of Chartered Accountants awards in Auckland. This was the third year in a row that NZRC has won the award for ‘Best Annual Report by a Corporate Organisation’ and faced

stiff competition from other corporate finalists, Telecom, Auckland International Airport, Christchurch International Airport, Marlborough Lines and Zespri.

In June, our 2009 Annual Report received a bronze from the Australasian Reporting Awards. To win at first time of entry was particularly pleasing and provided a valuable opportunity for our team to share best practice in reporting.

The Annual Report conveys our aspirations, achievements, and processes and we are continually looking to raise the bar on the standard of reporting in a way that our shareholders will understand and appreciate.

Also in 2010, NZRC was one of only three companies in New Zealand nominated for Energy Company of the year at the inaugural Energy Excellence awards in Wellington.

As part of our commitment to World Environment Day in June, we provided funding for the Bream Head Conservation Trust to conduct education days with local schools, and to produce an online education pack for teachers. Later in the year we formally joined forces as a key sponsor of the Trust’s full-time ranger.

Late in 2010 we became a sponsor of the Northland Events Centre (NEC) at Toll stadium in Whangarei. The NEC is a vital asset for the Northland community. It provides a home ground for the Northland Rugby Union, but is also a venue for corporate and other functions and a growing range of major sports events, including rugby league. In February 2011 the Company officially opened the NZRC Lounge with the support of over 800 staff, contractors and their families.

2010 was a year of significant loss for two New Zealand communities to which NZRC and our employees responded. In September the Company and its employees donated to the Canterbury Earthquake Appeal and in November we gave to the fund established for the families of the 29 Pike River miners who lost their lives.

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tHe new Zealand refining ComPany limitedPort Marsden HigHway, Marsden Point, wHangarei, nZ Tel: +64 9 432 8311 Fax: +64 9 432 8035 email: corporate@nzrc.co.nz www.nzrc.co.nz