ship.energy

Justifiably good PR?

New Zealand may not be on the maritime decarbonisation pathway yet, but commercial reality may move faster than regulations, just as is happening in other places including Australia and the US.

New Zealand gets good press. The twin islands are largely free of Coronavirus. The global elite apparently views the archipelagic idyll as a lifeboat for Armageddon. The government is perceived to have progressive environment policies.  New Zealand is one of a select group of nations to have enshrined a zero emissions goal into law. The 2019 Zero Carbon Act establishes a commission which will build a carbon budget during a five-year consultation period.

Greenhouse gas emissions have plateaued since 2012 and according to the thinktank Climate Action Tracker, they are on course to fall by around a quarter by 2050, largely as a result of changes to forestry and farming practice. Farming’s methane production is exempt from the package: New Zealand’s meat and dairy industry is too important to the economy.

As part of its NZD 20 billion Coronavirus bounce-back package, the government introduced optional ‘environmental safeguards’ to promote climate-neutral projects over polluting ones. Agriculture is also exempt from an emissions trading scheme which was reformed in June 2020, lifting the carbon price from NZD 25 (USD 17) to NZD 35 (USD 23) per tonne of CO2 emitted, and also capping the amount of carbon that can be traded before reducing it from 2021.

New Zealand aims to generate 90% of electricity from renewables by 2025 and 100% by 2035. No concrete action has been taken to achieve this but the government plans a Renewable Energy Strategy work programme, is revising a National Policy Statement for Renewable Energy Generation and is considering introducing National Environmental Standards for renewable energy generation – all of which would provide a framework within which commercial producers could operate.

To meet its net zero target by 2050, New Zealand aims to turn its agricultural and natural resources sectors into a carbon sink and to continue with a carbon emissions market, allowing it to offset the methane output from its farm animals.

NZ Hydrogen Strategy

The government is in consultation on a national hydrogen strategy which includes domestic green hydrogen use as well as hydrogen exports. The New Zealand Hydrogen Association was formed in September 2018 with seed funding from the Ministry of Business, Innovation and Employment to support the progression and uptake of low emission hydrogen in New Zealand.

New Zealand and South Korea have signed a Letter of Intent for a hydrogen export feasibility study exploring the potential to ship hydrogen from New Zealand to South Korea.

Several hydrogen projects are underway already.  In the North Island, a green hydrogen plant has been approved at the Marsden Point refinery. The NZD 37 million plant will use a 31 acre solar farm to generate the electricity to electrolyse hydrogen. 

Further down the coast, Ports of Auckland has committed to build a Hydrogen Generation Project to include hydrogen production and a fuelling station for cars, buses, port vehicles and equipment at Waitematā port.

Hyundai New Zealand has built a fuel cell filling station at Aukland where it generates green hydrogen to recharge fuel cells in its Nexo SUV which is on sale in New Zealand. As fuel cells gain acceptance it is possible that they can be scaled to other transport formats.  There has been interest in the recently developed Toyota marine fuel cell as demonstrated on the Hynova 30 hybrid electric yacht and the vessel Energy Observer which has already completed a trans-Atlantic voyage.

This year a green hydrogen plant began operations at Taupo. The plant, run by local green energy company Tuaropaki Trust and Obayashi Corp of Japan, uses geothermal energy to make green hydrogen for domestic and export markets.

So far the government’s environmental policies include no special provision for decarbonising the nation’s shipping and ports industries. The New Zealand flag fleet is small in number and deadweight but it is perfectly set up for electrification on domestic cabotage.

The New Zealand Shipping Federation (NZSF), a domestic body representing domestic shipping, says that 15% of domestic freight goes by sea and that volumes are expected to double by 2040. The NZSF compares New Zealand with Japan, a similar size country, but where 30% of domestic freight goes by sea.

Maritime Regulations Consultation

In October 2020 a consulting period ended in which the NZ government invited views on proposed amendments to NZ law required by NZ’s membership of the IMO as well as other marine regulations. These included the amendments to MARPOL covering waste disposal at sea but not the adoption of the CO2 emission reductions into NZ law.

When the 0.5% global sulphur cap was brought in at the start of 2020, the NZSF noted that most marine fuel in NZ was already below 3% sulphur content. There was only one supplier in New Zealand offering VLSFO – bp – and VLSFO availability was in question for ships trading only domestically. 

Refinery Finality

New Zealand faces the same refining issues as its near neighbour Australia. Small refineries facing Covid-19 related demand slumps are generating negative cash flow.  Their operators prefer to wind down production and convert them to import terminals for petroleum products.  

Local operator Z Energy says that converting the 135 k bpd Marsden Point refinery (in which it is a minority shareholder beneath ExxonMobil and bp) into an import terminal will prevent it selling marine fuels at a loss and that ‘The move to an import terminal model will deliver significant cost savings while protecting security  of fuel supply to New Zealand.’ 

Marsden Point is New Zealand’s only oil refinery. It has already announced that it will run at only 67 per cent capacity throughout 2021 to manage inventories and maintain a ‘cash neutral position.’

In its announcement about Marsden Point, Z Energy also mentions the opportunity to offer alternative fuels in future such as biofuels.  New Zealand is not on the maritime decarbonisation pathway yet but commercial reality may move faster than regulations, just as is happening in other places including Australia and the US.

Mark Williams

Mark Williams