Corona virus – Covid-19 Remote working

No doubt everyone reading this has already been affected by this virus – supply chain disruption and/or the measures being taken to avoid the spread of this virus through community transmission.

One recommended measure is to work from home whenever possible.

It’s not well known, but for several years Cubic has operated a totally decentralised remote working business model, using readily available technology to maintain a virtual office with all team members visible and audible to all other team members. Our VoIP phone system is an essential part of this.

We have often wondered why many other businesses don’t use the same model. But perhaps this crisis will be the catalyst for change.

For anyone considering this, I am happy to give you the benefit of the experience we have gained over the past few years, and an appraisal of the advantages and disadvantages of decentralised remote working. Call me on 09 3201062 or 021 328689, or email me at davea@cubic.co.nz

Coronavirus: The day Trump discovered coronavirus, and screwed the global economy


Luke Malpass16:32, Mar 12 2020

OPINION: So, Donald Trump, under all sorts of pressure in the United States over his handling of Coronavirus, has suddenly turned around and banned all travel of non-US residents from Europe to the United States.

Short of shutting all US borders and ports, this was the worst thing the US president could have done. Up until now Covid-19 look like something that would herald a downturn, but that public health interventions would get on top of. Countries such New Zealand would suffer while the free flow of people was disrupted, but things would stabilise and return to normal in due course.

That could all still happen, but Trump has now ensured that the flow of people will be reduced, airlines will get hammered, trans-Atlantic business will be seriously knee-capped. Global confidence will take a major hit. Like many things the US president does, there is no particular logic evident behind this decision. If Trump wanted to stop the spread of the virus he would have grounded internal US flights. Or banned flights from Europe weeks ago. Now, instead, he has sent a signal to the world – and global markets – that if faced by an unpredictable event, the US will issue a nonsensical and nativist response.

There is a whole industry of White House watchers in the US that try to ascribe grand narratives or strategic nous to anything that Presidents do – including Trump. But if Trump has shown anything during his presidency it is that he is capricious, impulsive and his decisions often lack basic rationality. The only thing he appears to have ever consistently believed is that running a trade deficit makes you a loser. That makes this latest decision even more worrying: it could get tied up in his broader protectionist agenda. 

For New Zealand, an open and exposed trading nation at the bottom of the world, this can only be bad news. While any holidaymakers to the US may change their plans and come down to New Zealand on account of being able to actually get in (for now), the fact the we have some Coronavirus cases – although not many – isn’t a great ad. In any case, if New Zealand follows the pattern of many other countries, we should expect more confirmed cases of the virus to pop up after a lull in the 48-72 hours.

The Government’s handling of Coronavirus has improved markedly this week, and the continued low-key approach has been in keeping with the national character. 

Trump said US clusters of coronavirus were "seeded" by European travellers.
MANUEL BALCE CENETA/APTrump said US clusters of coronavirus were “seeded” by European travellers. More lies.

But with global markets being smashed; a conservative Australian government now spraying around $A17.6 billion in stimulus cash to tourist operators, apprentices, families and pensioners; and the US President giving an unhealthy injection of uncertainty, the Government’s initial economic response expected early next week has taken on a whole new significance. From here it looks likely that this crisis will only get worse – for public health, private wallets, treasury coffers and jobs – before it gets better.

Stuff

The feebate failure shows EV action must come from the people

As Winston Peters obstructs a scheme designed to encourage take-up of electric and hybrid vehicles, we’ll have to look elsewhere for leadership on electric vehicles.Prime Minister Jacinda Ardern’s apparent inability to stand up to New Zealand First leader Winston Peters is looking not just embarrassing for her but perhaps costly for the country. Effective action on housing, child poverty and the environment were the standout promises of Labour’s campaign in the last election. The pledge to be “transformational” is now not only a broken promise but an increasingly deep disappointment. On top of the Government’s well-known failure with KiwiBuild, new figures show family poverty to be grudgingly intransigent. Sadly, the Government’s struggle to make headway is now not only in housing and poverty, but also in the environment.

With scientists warning the world has just 10 years to avert catastrophic global warming, the urgency for political parties to agree on workable measures is greater than ever. Yet for each step forward, such as the net-zero carbon legislation, there is another going back.

The latest backward step is the indefinite delay of the proposed feebate scheme designed to hasten and encourage take-up of electric and hybrid vehicles.

New Zealand is one of only two OECD countries to do nothing to regulate vehicle pollution and, thanks to petty political wrangling, we’ll be staying with Australia in the slow lane a while longer.

The scheme is not yet in ideal shape, but agreements were in place to neutralise the potential unfairness – and therefore the political risk – of making petrol and diesel cars pricier. The technical fishhooks could well have been straightened out through the select-committee process. In response to criticism from National and others, the Government had early on agreed to exempt farmers and those who depend on powerful, load-towing vehicles not yet available other than in diesel or petrol form. However, NZ First has now stalled the policy.

The Greens’ response has been to make their frustration public, thus depleting any remaining goodwill between them and NZ First. Labour has once again been left looking ineffectual in the face of coalition rivalry, and Ardern ineffective in preventing Peters from running the show.

As for the National Party, whose leader and transport spokesperson both drive EVs and which has an increasingly influential blue-green wing, it has yet to propose an alternative way to encourage New Zealanders to make the switch to electric vehicles.It’s fair to say both National and NZ First still have valid concerns about the proposed scheme’s effect on rural and provincial New Zealand, but it’s also true they could be “grandfathered” until suitable green vehicles emerge.

The Treasury argues the Emissions Trading Scheme would be a better way to drive our fleet conversion. But the scheme is complex, controversial and largely incomprehensible to most. The feebate’s transfer mechanism has the virtues of simplicity and comparative ease of implementation.

One can also argue that a compulsion to switch to electric vehicles – which are by no means free from environmental problems – will hasten the research and development required to improve them.

The limited, and often overstated, range of EVs, the paucity of charging facilities and sluggish supply of vehicles into New Zealand’s small market are all problems, with or without a feebate. Questions also abound over the sustainability of the EV batteries’ mineral-dependent manufacture and short life. And how do we greenly repurpose the redundant global fossil-fuel car fleet?

These issues need, and are receiving, urgent global attention.

Meanwhile, our most effective response to the greenhouse-emissions problem is a widespread conversion to EVs as soon as practicable.

Sure, the scheme was never perfect, yet perfect is not always the aim. Many people want to make the switch from petrol- and diesel-driven engines, and this scheme may perhaps have been less politically untenable than NZ First and National seem to presume.

In the face of the changes New Zealand must make to reduce environmental degradation, the feebate scheme is minor. However, as a signal of political commitment to move in the right direction, it is vital.

Those who can afford to switch to electric or hybrid vehicles, and who can see the value to New Zealand, should do so, knowing that environmental protection is too important to leave to political vagaries. They should be applauded, along with all Kiwis who consciously keep their transport emissions down. Leadership on this will have to come from the people.

This editorial  was first published in the March 7, 2020 issue of the New Zealand Listener.

Government to buy land for rail to Northport and Marsden Point

Charlie  Dreaver

Charlie Dreaver, Political Reportercharlie.dreaver@rnz.co.nz

The government has announced it will be buying land to build a spurline to Northport and Marsden Point and upgrading rail in the Northland region.

Railroad tracks. Railway tracks. generic

$40m has been earmarked to to purchase land along the designated route of the spur line to Northport and Marsden Point. Photo: 123RF

Today’s announcement comes as ministers are still considering the New Zealand First-backed policy of moving the bulk of Auckland’s freight operations to Northport.

State Owned Enterprises Minister Winston Peters and Regional Economic Development Minister Shane Jones today said $109.7 million would be invested into upgrading Northland’s rail infrastructure through the Provincial Growth Fund.

They said $69.7m would be spent to lower the tracks through tunnels on the Northland Line between Swanson and Whangarei, reopening the rail line from Kauri and building a container terminal at Otiria.

Another $40m was earmarked to purchase land along the designated route of the spur line to Northport and Marsden Point.

Jones said the investment would allow KiwiRail to secure the land needed for a new rail line to Northport.

“Having this land means that when the government does make its final decision about a future port in Northland, we will be ready to get going,” he said.

Last year it was announced $95m of provincial growth funding would be used to undertake maintenance on the rail line to Whangarei.

Peters said this second phase of funding was a game changer, allowing more freight onto rail and help reduce road congestion, road maintenance costs and lower carbon emissions.

“It will also mean that modern shipping containers can be carried through the tunnels on the North Auckland Line,” he said.

Mayors back move

In a joint statement, Far North mayor John Carter, Whangarei mayor Sheryl Mai and Kaipara mayor Jason Smith welcomed the announcement.

“These are historic investments, the start of a decade-long economic transformation for Northland to make an ever-greater contribution to the prosperity of the Upper North Island and all of New Zealand,” they said.

Carter hoped today’s announcement was a sign of good things to come for Northland, and said it was now up to the mayors to tell Northlanders and those in Auckland of the benefits of moving to Northport.

“It’s an indication of the fact that we now need to do our part so that then the parliamentarians, particularly during an election year, can do their part and they know they will get the support of the people if they come up with the goods,” he said.

He said moving the Auckland’s main port to Northport would be good for not only Northland but the whole of New Zealand.

National criticises spend on rail link before port decision

National Party Transport spokesperson Chris Bishop said the government was going about it the wrong way.

“The first thing to do should be to decide if the port is going to move to Northport and then you go about creating the infrastructure to make that happen.

“Instead what New Zealand First has essentially forced on the government is spending $40 million to buy the land for a spurline to Northport, in advance of a decision being made to move the port,” he said.

Bishop said if the port did not move, the government would have spent $40 million on a line that was irrelevant.

However, Prime Minister Jacinda Ardern said it showed they were a common sense government.

“It makes sense to connect your port to rail, regardless.”

She would not say whether it signalled a move to Northport.

Julie Anne Genter: Why the ‘New Zealand Upgrade’ falls short


Julie Anne Genter
 | Guest writer
Opinion

The Green Party transport spokesperson writes on the good, the bad and the ugly of the big infrastructure announcement.

It is election year and it is time to decide where we are heading.

The Green Party will be laying out bold plans this year for reducing our climate pollution, ensuring people have enough to thrive, and protecting nature.

This week’s announcement on the NZ Upgrade falls short of what is needed to deliver this work for the country.

We have been celebrating the wins we fought hard for in the NZ Upgrade. There is $200 million that our Green minister for climate change has won specifically to replace the coal boilers that are fuelling our schools and hospitals. This money will make a difference.

In transport, we got a lot more for the climate than you might expect. Over $1.6B for sustainable transport for rail, bus priority and a long overdue dedicated cycle and walkway over the Auckland Harbour Bridge.

But we have to be honest as a country that we need to go further and faster if we are to meet the goals in our Zero Carbon Act.

Generation Zero wrote in the Spinoff that they were very disappointed at some of the incredibly expensive motorway projects that make up the lion’s share of the transport spend in the NZ Upgrade.

They are absolutely right. It is nowhere near what we need.

Reducing climate pollution is not a “nice-to-have”. It is a physical imperative.

Either we reduce pollution enough to limit dangerous global over-heating, or we face an increasingly insecure future plagued by drought, fire, floods and famine.

If we’re going to borrow billions to invest in the future, we must ensure that every cent helps us protect that future.

Every one of us needs to do our bit in this fight, and every sector needs to pull its weight in cleaning up our act. Transport has been one of the worst, and increasing in recent years.

A few things need to happen for us to reduce transport pollution in line with our 1.5C goals. We need a step-change in public transport, active transport, rail and sea freight; and we need rapid electrification of our car fleet.

It’s true that the NZ upgrade transport package frees up more money in the National Land Transport Programme (the three-year transport budget). Our expectation is that public and active transport, rail freight and coastal shipping, and road safety will continue to be the priorities for future investment.

But the decision to resurrect a few very expensive highways won’t reduce emissions, won’t reduce deaths and serious injuries across the country, and won’t make it easier to get around for most people every day.

A Green Party upgrade would have prioritised differently, including:

  • Electrification of more rail lines around our major cities to shift trains away from diesel.
  • New rolling stock to increase the services for people, making rail more reliable and accessible.
  • Re-scoping roading projects to focus more on safety rather than increasing capacity far beyond what is needed.
  • Bus and other rapid transit projects, including light rail.
  • Supporting cycling and walking infrastructure in our towns and cities.
  • Electric vehicle charging infrastructure.

So what’s next?

I’ll be working to maximise the wins we’ve already won, including reviewing the scope of projects like Mill Road and the Tauranga Northern Link to make sure they include continuous bus lanes and modern off-road cycleways. It’s quite possible we can re-focus these projects to make them better for people and planet. And we will be bringing much better alternative projects to the election campaign.

To do more, to go further and faster, we will need more power in the next governing arrangement.

We have little time to act, but we have so much to gain by doing the right things in the transport space; a stable climate, cleaner air, happier, healthier more connected communities, lower petrol bills, and jobs that help people and the planet.

James Shaw defends transport spend-up: $5.3b on roads

Climate Change Minister James Shaw said today's announcement marked the most significant upgrade in public transport infrastructure in the time he has been alive. Photo / Mark Mitchell.
Climate Change Minister James Shaw said today’s announcement marked the most significant upgrade in public transport infrastructure in the time he has been alive. Photo / Mark Mitchell.

By: Georgina Campbellgeorgina@newstalkzb.co.nz

Climate Change Minister James Shaw is defending the Government’s $12b infrastructure announcement, in which roads are the big winner, amid criticism from green lobby groups.

Greenpeace and Generation Zero have criticised the package as a missed opportunity to clean up New Zealand’s transport network.

Although Shaw said as co-leader of the Greens it should come as no surprise that the party would have prioritised a different mix, he backed the package as Climate Change Minister.

“You can’t take away from the fact that there’s $1.8-billion of this package that is devoted to rail, light rail, cycling, walking infrastructure, the $200m that we’re putting into the clean-powered public service.”

Major roading projects announced were being rescoped to include, where possible, things like public transport, he said.

Roads make up $5.3b of the $6.8b spend on transport in the infrastructure package announced today.

That gives the green light to several four-lane highways, including State Highway 1 from Whangārei to Port Marsden, Mill Rd in South Auckland, widening SH1 from Papakura to Drury, the Tauranga Northern Link and SH1 from Otaki to north of Levin.

It was a coalition Government and the Greens had influenced the shape of the package overall, Shaw said.

He was particularly “delighted” with projects like the Auckland Harbour Bridge “SkyPath” going ahead, and the $1.1b for rail.

“When you consider the overall mix it will it will lead to a real shift in a congestion-free network for New Zealand.”

But Greenpeace climate and energy campaigner Amanda Larsson has slammed today’s announcement as a missed opportunity.

More roads would lead to more cars, which would contribute to more emissions, she said.

“The climate crisis is fundamentally an infrastructure challenge. We can move away from our dependence on dirty fuels by building lots of solar, wind, batteries, electric trains, busways, and cycleways. All of this creates thousands of jobs,and gives people options that they currently don’t have.

Generation Zero was equally disappointed.

Spokesman David Robertson said the Government had allocated an excessive amount of money for roads.

“These roading projects are paving the way to a climate disaster. This money should instead be spent on accelerating public transport infrastructure across New Zealand which in turn would encourage a mode shift, and reduce both congestion and emissions.”

But Shaw wasn’t worried today’s announcement would come back to bite the party in this year’s election campaign.

“If you look at the scale of what we’re investing here in cycleways, in walking infrastructure, in heavy rail, in light rail right around the country and in some of our most congested cities, I think this upgrade is the most significant upgrade in public transport infrastructure in the time I have been alive.”

How decarbonizing shipping could unlock a global energy transition

Climate change requires urgent action in all sectors of the economy – including maritime shipping, which carries close to 80% of global trade and accounts for 2-3% of global greenhouse gas emissions (GHG) annually. This is comparable with the emissions of large economies such as Germany and Japan. As global trade flows increase to serve a growing and more prosperous world population, emissions from shipping could grow between 50% and 250% by 2050 if no action is taken.

Shipping is not included in the Paris Agreement. However, to curb emissions, member states of the International Maritime Organization (IMO), a specialized agency of the United Nations responsible for regulating shipping, adopted an initial GHG strategy in April 2018. The strategy prescribes that GHG emissions from international shipping must peak as soon as possible and that the industry must reduce its total annual GHG emissions by at least 50% of 2008 levels by 2050, with a strong emphasis on zero emissions. This will ultimately align emissions from shipping with the Paris Agreement.

Shipping’s moon-shot ambition

At the UN Climate Action Summit in New York in September 2019, the Getting to Zero Coalition – a partnership between the Global Maritime Forum, the Friends of Ocean Action and the World Economic Forum – was launched with the moon-shot ambition of having commercially viable zero-emission vessels operating along deep-sea trade routes by 2030. This would put the industry on track to meet the target set by the IMO. Merchant ships have an average lifespan of 20 years or more, which means that ships entering the world fleet around 2030 can be expected to still be in operation in 2050. Similarly, infrastructure associated with fuel supply chains can have an economic lifespan of up to 50 years, and reconfiguration to new fuels can be a lengthy process. Consequently, if shipping is to halve its emissions by 2050, there is a need for zero-emission vessels to enter the global fleet by 2030 – only 10 years from now – as well as for a clear path to providing the large amounts of zero-emission fuels needed to allow for rapid uptake over the following decades.

Shipping is considered a hard-to-abate sector, and the decarbonization of shipping and its energy value chains can only be achieved through close collaboration and deliberate collective action between the maritime, energy, infrastructure and finance sectors, with support from government and international organizations. Since its launch in September, the Getting to Zero Coalition has grown to unite more than 100 public and private sector stakeholders.

The $1 trillion question

A new study by UMAS and the Energy Transitions Commission for the Getting to Zero Coalition spells out the scale of the challenge. According to their analysis, the cumulative investment needed between 2030 and 2050 to halve shipping’s emissions amounts to approximately $1-$1.4 trillion, or an average of $50-$70 billion annually for 20 years. This should be seen in the context of global investments in energy, which in 2018 amounted to $1.85 trillion.

If shipping was to fully decarbonize by 2050, this would require further investments of some $400 billion over 20 years, bringing the total to $1.4-$1.9 trillion.

Full decarbonization could cost $1.9 trillion
Image: Getting to Zero Coalition

Need for land-based investments outweighs the rest

The analysis also sheds light on where investments need to take place. These can be broken down into two main areas: ship-related investments, which include engines, on-board storage and ship-based energy-efficiency technologies; and land-based investments, which include investments in the production of low-carbon fuels, and the land-based storage and bunkering infrastructure needed for their supply.

The biggest share of investments is needed in the land-based infrastructure and production facilities for low-carbon fuels, which make up around 87% of the total.

Only 13 % of the investments needed are related to the ships themselves. These investments include the machinery and onboard storage required for a ship to run on low-carbon fuels both in new-builds and, in some cases, for retrofits. Ship-related investments also include investments in improving energy efficiency, which are estimated to grow due to the higher cost of low-carbon fuels compared to traditional marine fuels.

What’s the World Economic Forum doing about the transition to clean energy?

A trillion-dollar market opportunity

While the exact numbers on total bunker fuel consumption for shipping are not readily available, they are estimated to be around 250-300 million tons of fuel consumed annually. This means that shipping’s decarbonization has the scale to be a catalyst for the broader energy transition, unlocking the market for zero-emission fuels – a shift that represents a trillion-dollar market opportunity.

In order for companies and governments to make the investments required to accelerate the shift to zero-carbon fuels for shipping and other hard-to-abate sectors, we need to bring together the full range of the upstream and downstream fuel value chains to create a deeper understanding of the production and supply of the zero-carbon fuels that will pave the way for shipping’s decarbonization.

We invite stakeholders who share this ambition to join us in our mission to serve global trade in a sustainable manner.
Source: World Economic Forum

Shipping’s Big Bang Sends Two Global Industries Spinning

Two weeks ago, the vast majority of the world’s ships were forced to change the fuel they use. Some big winners — and potential losers — are starting to emerge from what was a historic switch for the world’s oil refining and maritime industries.

Regulations began on Jan. 1 forcing vessels to sharply reduce emissions of sulfur oxides from burning so-called bunker fuel. If successful, the rules could turn out to be the single-biggest, globally mandated improvement to air quality ever. The pollutant is blamed for worsening human health conditions like cardiovascular disease and asthma, and causing acid rain.

But the cost of the new fuel has skyrocketed to the point where it recently surpassed diesel and gasoline in Singapore, Asia’s oil-trading hub. The dynamic adds to the cost of transporting goods and raw materials — a potential impediment to global supply chains since fuel represents the maritime industry’s single-biggest expense.

IMO fuel surpasses gasoline and diesel

“The cost of world trade is rising when the bunker costs go up,” said Peter Sand, chief shipping analyst at BIMCO, a trade group for many of the world’s vessel operators. Even if the hike will be largely invisible to end consumers, it’s important to owners, some of whom may end up in financial difficulty if fuel prices stay high, he said.

IMO 2020, as the rule is known, is a global sulfur cap on marine fuel of 0.5%, down from 3.5% in most parts of the world. The Jan. 1 start date was set back in October 2016.

The price surge points to significant support for those refineries that make the new product. Likewise, some shipowners are making fortunes because they invested in kit allowing them to burn the old sulfur-rich variety, which is several hundred dollars a ton cheaper.

Ship Shape

Before the rules took effect, some shipowners plowed billions of dollars into exhaust-gas cleaning systems that prevent the sulfur from being released into the air. The equipment allows their vessels to keep using the old fuel without breaking the rules.

Those who invested appear to be gleaning a competitive advantage because the discount for the old fuel is so big.

Supertankers hauling 2 million barrels earned about $20,000 a day more so far this year if they were fitted with scrubbers, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. That’s about $7 million a year in savings if the current market were to continue.

Scrubber investments could pay off in less than a year, according to Richard Matthews, head of research at E.A. Gibson Shipbrokers Ltd.

Rates for the oil tankers are very high by historical standards, meaning even those without are doing well.

However, where it may become more of an issue is in freight markets that are weak. For example, giant iron-ore carrying Capesizes bulkers built in 2010 earned about $4,000 a day so far this year. That’s not enough to even cover operating costs including crewing and repairs. The same carriers fitted with scrubbers earned about $10,000 a day more than that. Not great, but a level they can survive at.

If the current market doesn’t improve, those lower earnings might eventually discourage some ship operators from transporting cargoes, something that would help the owners of vessels that do have scrubbers.

Sand, from BIMCO, says that there could even be loan defaults if the price of compliant fuel doesn’t drop.

Refineries Diverge

For oil refiners, IMO 2020 has transformed marine fuel from essentially a waste material sold at a discount to crude into one of the industry’s most valuable products. What’s widely now seen as the dominant new propellant — very low-sulfur fuel oil, or VLSFO — is about twice the price of the old material in Singapore and Rotterdam. A similar trend is playing out for marine gasoil, the other main clean-fuel shippers can use to comply with IMO 2020.

The main new fuel’s high price is in some ways hard to explain. In theory, it shouldn’t be more expensive than products like gasoline and diesel because it’s easier to make.

Today’s sky-high prices are the result of both the refining and shipping sectors wanting the other to invest in making it, said Alan Gelder, vice president for refining and chemicals, at Wood Mackenzie Ltd., an energy consultant.

There have also been fuel availability issues at some ports around the world, as well as a shortage of barges to deliver, according to Melissa Williams, a marine fuel sales and marketing manager at Royal Dutch Shell Plc.

Standard Club, a marine and energy insurer, said Tuesday that it’s been notified of concerns about a lack of compliant fuel at some ports, without identifying which ones.

“The impact on refiners isn’t the same across the board,” said Mark Williams, principal refining analyst at Wood Mackenzie. Refiners in the U.S. Gulf coast which can process high-sulfur fuel oil — the old propellant that has become much cheaper since the switch — are doing very well, he said. But any refiners that lack upgrading equipment and process sulfur-rich crudes will be feeling squeezed.

More broadly, refiners are having to rethink their whole approach to fuel production as other margins are pulled around by the IMO 2020 effect. Low-sulfur feedstocks like vacuum gasoil and straight-run fuel oil that, among other things, can be used to make the new product, have shot up in value relative to crude. If large volumes get diverted to the maritime market, more traditional outputs like gasoline, that can also be made from them, could tighten.

The diesel market, meanwhile, has largely shrugged off the IMO 2020 boost many were expecting. Warm weather across the globe is partly to blame, along with recent downward revisions to oil demand growth forecasts, said Steve Sawyer, director of refining at FGE. The result is VLSFO rising above diesel in Singapore, a “bizarre” pricing dynamic, he said.

Looking forward, Sawyer expects VLSFO to remain at a premium to crude as long the crude oil price remains in a $60-70 a barrel range.

Gelder and Williams expect the VLSFO price to fall going forward, while the price of HSFO is set to rise by about 20% by the fourth quarter as more shippers fit scrubbers. The IMO transition period, meanwhile, is set to last for a couple more years, they said.

So the current price surge is just the start of a process. Refineries will need to decide if it’s worth spending the money on equipment to make new fuels, and shipping companies will have to consider buying more scrubbers.

“If you’re going to reduce the impact of these extra costs on the overall economy, there’s more investment needed,” Gelder said.

Smooth Sailing for Ships After Historic Fuel Switch

A major switch in maritime fuel aimed at reducing emissions from ships is proceeding smoothly, shipping executives say, with new blends available in most ports and operators reporting few problems adapting to the fuel.

The mandatory change began on Jan. 1, when some 60,000 oceangoing vessels were ordered by the International Maritime Organization, the United Nations’ marine regulator, to slash their sulfur emissions by more than 80%. It is the first in a series of environmental steps the maritime industry is due to take in the coming years that will alter operating costs and raise fundamental questions about how ships should be powered.

To comply with the 2016 Paris climate accord, members of the IMO have also agreed to cut greenhouse-gas emissions to half of their 2008 level by 2050. Ships now contribute up to 3% of the world’s global air pollution, a share comparable to that of a major country.

Shipping executives say the low-sulfur directive alone will add around $50 billion in new fuel costs over the next three to four years, and they say they plan to pass the expenses on to cargo customers.

Low-sulfur fuel in Singapore, one of the world’s biggest refueling hubs, was quoted this week at an average $670 a ton, 64% higher than the $409 a ton for the heavy oil, known in the maritime sector as bunker, that has long powered ships. Bunkering brokers said the price spread is at least 10% higher than shipowners originally expected, but the gap is expected to narrow over the next couple of months.

“It’s very expensive right now,” a senior broker in Singapore said. “Demand is high and many bunkering barges are still flushing the old fuel from their tanks, meaning not enough is out there and ships are held up longer to refuel.”

Fuel represents up to half of a ship’s operating expenses, and some operators will see their earnings take a hit this year as the cost is absorbed through supply chains.

“If shipping companies take on all the cost, they will collapse,” said Kitack Lim, secretary-general of the IMO, the global marine regulator that mandated the fuel switch. “But compared to the value of the cargo, price increases to consumers will be very small.”

The fears of some shipowners that there wouldn’t be enough low-sulfur fuel availability, or that it wouldn’t work well with maritime engines, so far appear to be unfounded.

“The switch went well and we haven’t experienced issues with performance or fuel availability,” said Ole Graa Jakobsen, head of fleet technology at Denmark’s A.P. Moller-Maersk A/S, the world’s largest operator of container ships by capacity. “We have lab-tested a broad range of fuel formulations to determine optimal blends for our vessels.”

Maersk’s French rival CMA CGM SA, which operates more than 500 container ships, said prices vary from port to port, with rates at big European gateways being cheaper.

“There is a wide spectrum of different blends, that may not all be available in some ports in Africa and South America” said Farid Trad, the group’s vice president for oil management. “There is high demand so fuel barges take more time now. The challenge is to get the entire supply chain to work together, from fuel suppliers to refueling barges to shipowners managing their fuel needs.”

Bunkering suppliers say new fuel supplies are short for smaller vessels doing coastal sailings on the east coast of India, the Philippine archipelago and Bangladesh.

“There was not enough preparation in India and new fuel supply is low, especially for small tankers and container ships in the east coast,” said Venkat Argawal, who runs three refueling barges at India’s Port of Chennai.

“Some are breaking the rules and run on heavy oil until supply is restored.”

One of the IMO’s biggest challenges is that member states enforce the new fuel regulations. This week, China caught two ships that were allegedly using noncompliant fuel according to the Standard P&I Club, a major maritime insurer.

“We are monitoring the situation and to date, whilst there have been some reports of tight supply of compliant fuel oil in some markets, so far we have not received reports of any significant issues,” an IMO spokeswoman said.

Some vessel operators, especially tanker owners, have chosen to limit their sulfur emissions with exhaust systems called scrubbers that trap sulfur created by fuel-burning engines.

The systems cost several million dollars, but companies using them could benefit from big operating cost savings in the next few years over carriers that are spending more for new, more expensive low-sulfur fuel.
Source: Wall Street Journal

Massive R&D needed to decarbonize deep-sea shipping beyond 2050

The goal of the International Maritime Organization (IMO) to turn the oceangoing vessel industry emissions and carbon free beyond 2050 will require a technological replacement to the dominant fossil fuel-burning engines of the world’s maritime fleet, World Shipping Council President and CEO John Butler told U.S. lawmakers of the House Coast Guard and Maritime Transportation Subcommittee on Tuesday.

While emissions- and carbon-free technologies, such as battery and hydrogen power, are already in the development stages for short-sea and ferry vessel applications, their scale is nowhere near the level to power today’s large oceangoing vessels.

“We have to keep in mind that the scale is different for the transoceanic, larger international vessel sector than it is for the short-sea sector,” Butler said. “We can’t make the mistake that batteries work for ferries and we just need a bigger battery [for oceangoing ships].”

Maersk (OTCMKTS: AMKBY) is currently testing a 40-foot container-size battery on board one of its container ships, Lee Kindberg, the carrier’s North American head of environment and sustainability, told the House subcommittee.

Kindberg said the battery will not provide power for ship propulsion but will be tested for potential onboard power uses, such as shipboard lighting, electric pumps and refrigerated containers.

However, she said Maersk has committed to “net-zero carbon emissions” for its worldwide operations by 2050 and is currently retrofitting vessels with new technologies and testing “carbon-neutral” biofuels, such as those made from cooking oil and an ethanol made from the byproducts of agriculture, paper and wood products manufacturing.

“The transformation from low- to zero-carbon emissions is an energy transformation, not just a vessel modification,” Kindberg said. She added that it will require not only massive industry and government investments in new vessel propulsion systems development but also shoreside-support energy production and infrastructure.

In 2018, the IMO, a United Nations body of which the U.S. is a member, adopted a resolution that called for a 40% increase in overall fleet efficiency compared to 2008 by 2030 and then a 50% reduction in absolute greenhouse gas emissions by 2050, with emissions being reduced to zero or near zero within ocean shipping beyond the half-century mark.

Butler told the House subcommittee members that it is possible for the ocean shipping industry to achieve the IMO’s 2030 goal.

“A highly competitive liner shipping market, fuel price increases associated with the IMO 2020 marine fuel sulfur cap regulation and increasing societal and customer requirements to reduce emissions provide vessel operators with powerful incentives to make their operations as efficient as possible,” he said in his testimony.

However, to achieve the organization’s 2050 goal and beyond will require a substantial, globally funded and driven research and development effort, Butler said.

On Nov. 18, the World Shipping Council and seven other shipping organizations proposed that the 174-member IMO establish a $5 billion to $6 billion research and development effort over the next 10 to 12 years to identify fuels and related technologies to aggressively achieve the IMO’s decarbonization goals for the global ocean shipping industry. The International Maritime Research and Development Board (IMRB) would be funded by a mandatory contribution based on each ton of fuel burned, Butler said.

“Because oceangoing vessels are long-lived assets (20-25 years), we must move as quickly as possible to develop and deploy low-carbon and zero-carbon propulsion systems and fuels to avoid stranded assets and delays in implementing next-generation technologies,” he said.
Source: Freight Waves