Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Shipping Federation on Emissions & low sulphur fuel

Fact Sheet on NZ issues relating to
IMO Nitrogen Oxide (NOx) Tier III
MARPOL Annex VI and Sulphur Oxide (SOx)

The purpose of this factsheet is to assist anyone interested in this issue but not familiar with the operation of SOLAS vessels.

• IMO Tier III requirements apply to new vessels and engines built since 1 January 2016. Technically, the trigger is keel-laying after 1 January 2016 and an engine output of greater than 130kW. Earlier vessels are generally subject to Tier II requirements.
• The difference between the Tier II and Tier III is a reduction in the production of NOx by approximately 76%.
• It is expected that any vessels being constructed today will meet Tier III requirements because this is needed for international voyages and impacts on resale value.

• As measured by the volume of cargo carried, 88 out of 172 IMO member states have signed up to MARPOL Annex VI, representing 96% of World tonnage.
o Lots of individual countries have not signed but they do not have significant cargo volumes.
o Most of the SOLAS vessels on the NZ-international circuit are flagged to countries that have signed MARPOL Annex VI
o MoT has commenced engagement with the sector and will commence cost-benefit analysis on the implications of acceding to Annex VI. If the engagement and analysis supports the case for accession, a formal National Interest Analysis will be carried out, informed by public consultation, with recommendations to Cabinet.
• 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
o January 2012 3.5% by mass
o January 2020 0.5% by mass
• Within the Annex, certain areas of the globe have been designated Sulphur Emission Control Areas (SECA’s). Since 1 January 2015 the sulphur limit for fuel oil used by ships in these areas has been limited to 0.10% by mass.
• Note that there are health issues in respect of SOx but MARPOL does not specifically address particulate emissions.
• Australia has signed the Annex. It already imports most of its fuel and is expected to import 0.5% fuel when the lower requirements come in.

The refinery and availability of low sulphur fuels
• SOLAS vessels in NZ are generally using no greater than 3.5% fuel, either because of the Annex or as a commercial decision. The fuel produced by the NZ refinery is approximately 1.9 – 2.8% (depending on viscosity/grade) and any vessel bunkering in NZ will be using this.
• Note that fishing vessels and recreational vessels use automotive gas oil (known as AGO i.e., fuel available at gas stations that goes in trucks and cars) so they are not part of this discussion.).
• The refinery does not blend marine diesel oil (MDO). MDO is a blend of AGO mixed with light fuel oil to create a fuel that does not require heating but is cheaper than AGO.
• Retooling the Marsden Point refinery to produce low sulphur fuel
• The cost of retooling Marsden Point to convert all high-sulphur residues to MARPOL-compliant product will be high and prohibitively expensive.
• The refinery is currently exploring if it is possible to produce smaller volumes of 0.5% sulphur fuel, and what may be required to achieve this. This has not yet been fully scoped nor costed.
• Whether Marsden Point eventually produces low SOx fuel will be a commercial decision for the refinery.
• Currently, high sulphur by-products from refining have commercial value to Marsden Point. Once the 0.5 % sulphur requirement comes into force, this situation may change, affecting the refinery’s business model in this regard. In the event that there is a major shift to low SOx fuels, there is an open question as to how the high sulphur residues will be disposed of or used.

Fuel usage in practice
• Ministry of Transport officials believe that IMO sulphur fuel requirements will not affect domestic shipping until such time as New Zealand accedes to Annex VI, should Government make such a decision. Federation members do not agree. If the rest of the world moves to implement Annex VI, then the fuel companies, as global players, will respond and supply fuels accordingly. NZ is a very small fish at the end of the supply chain, we will be affected by Annex VI, irrespective of NZ government decisions.
• Regardless of what NZ does, SOLAS vessels going internationally will need to comply with the requirements of the state they are visiting. Port State Control has the power to enforce this under ‘no more favourable treatment’ provisions. Coastal ships going to Sydney or Singapore, typically for survey or repair can be affected by this.
• Federation members are already making decisions in response to MAROL Annex VI. Factors to be considered include assumed availability of fuels, supply infrastructure, costs and the operating requirements (such as heating and filtration) of particular engines. In some cases, decisions have already been made to operate using diesel.
• There has been some discussion in the media about vessels using a variety of fuels.
• Because vessels have multiple tanks, the opportunity for fuel switching exists.
• It is very unlikely that ships of Ratifying States will carry higher sulphur fuels for use in the waters of non-party States or in international waters. This is because IMO sulphur limits apply to fuels used in territorial waters of Annex VI Contracting States and ships of Ratifying States on the High Seas.

The future and the policy picture
• The maritime sector experience is that every time NZ deviates from accepted international regulation, it makes it harder for vessel operators to comply, not easier. If there is one set of rules for trading coastal, and then another set when the same vessels go outside of New Zealand’s EEZ, there can be additional costs and confusion
• Even if NZ does not sign up to Annex VI, all international ships calling here will still need to comply with the requirements, and all New Zealand based ships (coastal vessels) travelling internationally, will still need to comply. As such, the vast majority of fuel supplied to ships in NZ, will need to be compliant with the 0.5% sulphur cap. Only a small portion of fuel would be exempt from this limit.
• As Annex VI stands, there are two routes to compliance.
o Vessel operators can continue to use high sulphur fuels (above the 0.5% cap), but need to have fitted an exhaust gas treatment system (also known as “scrubbers”). This is generally considered to be uneconomic for the current New Zealand coastal fleet. Retro-fitting scrubbers on existing vessels poses significant practical problems, for example because of their size and the complexity of incorporating them into the engine system. Scrubbers have not been widely implemented on international trading ships. Or,
o Vessels operators can use fuels with less than 0.5% sulphur content. At this time, the only fuel available in NZ that meets this specification is diesel. In NZ, there is only one grade of diesel supplied by the refinery for all users – marine and road going. This is relatively expensive amounting to approximately up to 50% higher cost. The actual cost increase to each user varies and is confidential.
• None of the fuel companies have yet stated what fuels they propose to supply post 1 Jan 2020. We believe that most of them will be waiting to see if IMO adhere to this date or defer implementation to 2025. However, it seems unlikely that they would simultaneously supply both high and low sulphur grades of fuel in the NZ market.
• Any low sulphur fuel is almost certain to be imported from Singapore as costs to modify Marsden Point to produce this are likely to be prohibitive. However, Refining NZ is still evaluating whether the supply of some 0.5% bunker fuel is possible.
• Ships, and the fuel infrastructure that supplies them, are long term assets. Both ship owners and fuel companies need certainty of policy to ensure that good investment choices are made.

Terms explained: Marine Diesel Oil (MDO) & Intermediate Fuel Oil (IFO)

© Scoop Media

Business Headlines | Sci-Tech Headlines


Energy Resources Aotearoa: New Law On Decommissioning Could Be Costly Overkill
A new law on decommissioning oil and gas fields passed by Parliament today has good intentions but is overkill, according to Energy Resources Aotearoa. "We strongly support operators taking responsibility and paying the costs for decommissioning, which is what all good operators do," says chief executive John Carnegie... More>>

Commerce Commission: News Publishers’ Association Seeks Authorisation To Engage In Collective Bargaining

News Publishers’ Association of New Zealand Incorporated seeks authorisation and provisional authorisation to engage in collective bargaining with Facebook and Google. The Commerce Commission has received applications from News Publishers’ Association of New Zealand Incorporated (NPA) seeking authorisation and provisional authorisation on behalf of itself... More>>

Reserve Bank: MPC Continues To Reduce Monetary Stimulus
The Monetary Policy Committee agreed to raise the Official Cash Rate (OCR) to 0.75 per cent. The Committee agreed it remains appropriate to continue reducing monetary stimulus so as to maintain price stability and support maximum sustainable employment... More>>

PriceSpy: Producer Prices Increase
New Black Friday and Covid-19 Report* released by PriceSpy says people’s fear of stepping inside physical shops during big sales events like Black Friday has risen since last year; Kiwis are still planning to shop, but more than ever will do it online this year... More>>

NZ Skeptics Society: Announce Their 2021 Awards, And Dr Simon Thornley Wins The Bent Spoon

Every year the New Zealand Skeptics presents its awards to people and organisations who have impressed us or dismayed us, and this year it’s been hard to pick our winners because there have been so many choices!.. More>>

REINZ: Sales Volumes Leveling Out

Data released today by the Real Estate Institute of New Zealand (REINZ) shows there were 44 fewer lifestyle property sales (-2.6%) for the three months ended October 2021 than for the three months ended September 2021... More>>

BNZ: Auckland Retail Card Spending Bounces Back In Step Two
Bank of New Zealand (BNZ) card spending data released today shows one week of retail therapy at Alert Level 3 Step 2 has been enough to raise card spending in Auckland to levels greater than before the Delta lockdown... More>>