2018 Submission to Environment Select Committee: Crown Minerals (Petroleum) Act
2018 10 08 Final Submission Crown Minerals Petroleum Bill
8 October 2018
Submission in respect of
Crown Minerals (Petroleum) Amendment Bill.
We are making this submission to register our concerns about both the process and the effect of the Crown Minerals (Petroleum) Amendment Bill.
The New Zealand Shipping Federation began in 1906 and is the key representative body for New Zealand’s coastal shippers.
Members of the Federation are:
- Maritime transport is a low impact method of transportation of people and freight. It has little impact on land except to the extent that goods and people need to be moved to a port in order to be transported by sea.
- Ships transit waters and obviously do not require highway maintenance. Per kilometre (or per nautical mile) travelled, maritime transport is both cheaper financially and lower on atmospheric emissions.
- New Zealand’s commercial shipping fleet currently operates diesel engines for propulsion, consuming both gas oil, marine heavy fuel oil (HFO) and marine light fuel oil (LFO) delivered from Marsden refinery to ports around the country.
- With current technology, the use of some sort of fuel is likely to continue into the foreseeable future.It is unsurprising that marine transport does not yet have a viable emissions free alternative to fossil based fuels. Electric and battery hybrid options are not likely to be capable of offering sufficient power or range within the foreseeable future, but will support ongoing efficiency and decarbonisation.
- New Zealand has not ratified the international treaty known as MARPOL Annex VI, although we expect this to happen, possibly by 2023.In the meantime, 88 out of 172 of the International Maritime Organisation’s member states have signed up to MARPOL Annex VI, representing 96% of world tonnage.Most if not all of the vessels operating on international routes that include New Zealand are flagged to states that that have ratified MARPOL Annex VI.
- MARPOL Annex VI seeks to control SOx emissions through limitations on the sulphur content of marine fuels.The sulphur content limits set by the annex are:
- As a point of reference, we understand that the LFO produced in New Zealand and used by ships bunkering in New Zealand today has a sulphur content of 2.5% by mass.We are not aware of any proposal by the refinery in New Zealand to modify plant to produce a lower i.e., compliant, LFO.NZ both imports and produces compliant gas oil.
- Federation members also have concerns as to whether the New Zealand refinery will continue to produce HFO and/or LFO, and if they do, up to what date, given the limited number of vessels that are New Zealand flagged and therefore not subject to MARPOL Annex VI from 1 January 2020.
- Non ratification by New Zealand also creates significant uncertainty as to how New Zealand flagged vessels will be able to comply with the Annex, both in respect of certification and as to compliance with the prohibition on the carriage of non-compliant fuels when in a port state that has ratified (e.g. for dry docking or for the carriage of cargo).
- Once New Zealand has ratified MARPOL Annex VI (and in respect of travel into a flag state that has ratified) the low emissions requirements in MARPOL Annex VI can be met by a change to propulsion technology (e.g., marine exhaust gas cleaning systems, often referred to as scrubbers, that remove sulphur oxides from ship's engine and boiler exhaust gases) or by a change in the type of fuel that is used (e.g., to diesel or to a fuel blend including diesel).Neither of these options are without cost.In some cases the option to change technology does not exist and then the only option is to change the fuel used.
- If scrubbers are installed, a new set of issues arises, e.g., the disposal at ports of large amounts of scrubber waste.Waste disposal pursuant to Article 38 MARPOL Annex I is already problematic in New Zealand ports.Article 38 states:
- The Government of each Party to the present Convention undertakes to ensure the provision at oil loading terminals, repair ports, and in other ports in which ships have oily residues to discharge, of facilities for the reception of such residues and oily mixtures as remain from oil tankers and other ships adequate* to meet the needs of the ships using them without causing undue delay to ships.
- See http://www.marpoltraining.com/MMSKOREAN/MARPOL/Annex_I/r38.htm
- Right now, it is questionable whether the New Zealand Government is meeting its treaty obligation in respect of Article 38 as ships currently experience difficulty identifying ports with capacity to receive residues and oily mixtures.We are unaware of how the government intends to ensure that sufficient facilities are going to be in place to receive the large amounts of scrubber residues that are expected.
- The sector expects that wide-scale shifts will occur in the type of fuel used by ships, probably starting about 6 months prior to 1 January 2020.This is likely to be very disruptive to the worldwide fuel market.It is widely expected that this will impact on both the availability and the price of fuel, especially gas oil (diesel).This impact will begin as the changeover occurs and will continue for the foreseeable future.
- One possible and alternate option for shipping companies operating propulsion engines currently consuming fuel oil, is to investigate a change to methanol or LNG (liquified natural gas). Both are low emissions fuel.Methanol and LNG both offer pathways to transition to lower carbon fuels and technologies, as well as reduced other emissions such as NOx and particulates.Both require new supply infrastructure to be developed, and for this to be viable, the industry needs to have certainty of long term supply availability.To be clear, there needs to be certainty of a secure source of any fuel (methanol or LPG) before the investment is likely to be made into the infrastructure that is necessary to use it.
- As a fuel, Methanol is simpler to retrofit, as it is a liquid fuel, so is easier to store and ship. It is also relatively easier to convert existing ships’ engines and machinery to utilise this fuel.
- LNG may be more suitable for newly built ships, but to commit to this low emission technology, any owner would need to have confidence in the long term supply.
- Local supply of methanol is available in New Zealand (from Methanex, out of Taranaki), but not LNG.As fuel oil prices increase due to the effect of MARPOL Annex VI, it is expected that methanol will become a more attractive option on an energy equivalent basis.
- It is worth reiterating that a shift to methanol by any vessel operator operating on the New Zealand coast would necessitate a considerable investment by the vessel operator and by the port at which the methanol would be stored.
- We are very concerned that the content of this bill, and the compressed timeframe for its progress through Parliament, will influence decisions made in respect of the extraction and production process of methanol and decisions about the future-proofing of the existing methanol production plant. This is about the confidence within the sector to invest in production. This is reflected in the media coverage of recent decision in the sector such as http://www.sharechat.co.nz/article/55503a67/methanex-emissions-reduction-project-falls-victim-to-exploration-ban.html
- January 20123.5% by mass
- January 20200.5% by mass
We would like to appear in front of the Select Committee.At this stage we anticipate that those appearing will be our President, Clive Glover and our Executive Director, Annabel Young.
Thank you for the opportunity to make this submission.
New Zealand Shipping Federation Inc