After an extended and protracted negotiation between Industry and Government, the Petroleum Sector Reform Act was introduced in December 1987.

Initial concern was centred in Northland, an area that already had high unemployment and could expect to lose up to 1500 further jobs if the Refinery closed. Various interested bodies made relevant noises, not least of which was the Refinery’s own "88 fighting for 89" campaign.

The Refinery was exposed to a deregulated environment on May 3 1988. The 16 cents per litre levy originally set as a loan repayment was left as a tax on fuel prices. As part of the agreement with the government the refinery assets were gifted to NZRC along with an $85 million grant to assist the company adapt to the deregulated environment. The “cost plus” profit controls previously in place were removed and the Refinery began a negotiation of processing arrangements with the oil companies.

After 23 years of operation the Refining Company was finally being allowed to shape its own destiny.

NZRC was now unprotected in a free market economy. In October 1988, an initial processing agreement was finalised with the oil companies and various targets to improve efficiency were put in place. A large de-manning and restructuring exercise was undertaken, maintenance costs were trimmed, capital projects reviewed and the Northland Port Corporation tug service contract was renegotiated.