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20th March 2019

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Oil Steadies Above $57 Amid Supply Disruptions Around the World

Oil steadied above $57 a barrel in New York as the threat of supply disruptions from the North Sea to OPEC member Nigeria and reduced U.S. drilling all suggested the global surplus may continue to fade.

Futures added 0.5 percent in New York, matching Friday’s gain. U.S. explorers trimmed the number of rigs by four to 747 last week, according to Baker Hughes data. A Nigerian oil union announced an indefinite strike while the country’s fellow OPEC members pressed on with efforts to clear a crude surplus. Ineos repeated that a crack in a North Sea pipeline will take two to four weeks to fix.

Oil is set for a second yearly gain as the Organization of Petroleum Exporting Countries and its allies trim production to drain a global glut. While the group has extended cuts through the end of 2018, it faces a challenge from output in the U.S., which is forecast to surge next year to a record 10 million barrels a day.

“Investors remain bullish on oil as global growth looks strong, OPEC has extended cuts throughout 2018 and geopolitical risk has made its way back to the oil market,” said Jens Naervig Pedersen, an analyst at Danske Bank A/S in Copenhagen.

WTI for January delivery, which expires Tuesday, rose 30 cents to $57.60 a barrel on the New York Mercantile Exchange as of 1:28 p.m. in London. Total volume traded was about 30 percent below the 100-day average.

Brent for February settlement gained 29 cents to $63.52 a barrel on the London-based ICE Futures Europe exchange. Prices fell 0.3 percent last week. The global benchmark traded at a premium of $5.92 to February WTI.

The Brent net-long position — the difference between bets on a price increase and wagers on a drop — rose 1.8 percent to a record 544,051 contracts, according to data from ICE Futures Europe. Money managers cut their WTI net-long position by 0.4 percent to 390,874 futures and options in the week ended Dec. 12, the U.S. Commodity Futures Trading Commission said Friday.

Source: Bloomberg

Agency hopes to cut shipping emissions

A new agency opened in Fiji hopes to cut down the greenhouse gases being pumped out by the thousands of ships criss-crossing the Pacific.

A Pacific Basin Shipping boat on the water in Gisborne the morning of the earlier 7.1 earthquake and subsequent tsunami warning in the area.

Photo: RNZ / Claire Eastham-Farrelly

The Pacific Community said old ships are a big contributer to the region’s greenhouse gas emissions.

The new agency, called the Maritime Cooperation Centre, hopes to kick off a transition to low-carbon shipping.

The SPC’s Thierry Nervale said it will be part of a global network, and will work to create greater awareness and make greener technology available to companies in the region however it has got its work cut out for it.

“The main issue is to access new technologies and to ensure new technologies are available for domestic fleets in the Pacific which is one of the main issues,” he said.

“It will be quite expensive, particularly for ship owners because we have very small shipping companies.”

Shipping industry must take ‘urgent action’ to meet Paris climate goals

A declaration launched today at the “One Planet” climate summit hosted by French president Emmanuel Macron has urged the shipping industry to meet the Paris climate goals.

The “Tony de Brum” declaration – named after the celebrated Marshallese politicianwho died earlier this year – calls for shipping to take “urgent action” to contribute to meeting the 2C and 1.5C goals of the Paris accord.

The declaration was released at the summit in the French capital, which marks two years since the Paris Agreement on climate change was adopted in the city.

It was signed by 35 countries, including the UK, France, Denmark, Germany, Canada, the Marshall Islands, Chile and New Zealand.

Shipping produces at least 2% of global CO2 emissions, but the International Maritime Organisation, the London-based UN agency responsible for regulating shipping, has struggled to set its own emissions reduction target.

Other key news from the summit included an announcement from the World Bank that it will largely stop financing oil and gas exploration after 2019. In addition, Macron described Donald Trump’s announcement in July that he intends withdraw the US from the Paris accord as “extremely aggressive”.

The new shipping declaration comes amid a current push within the IMO to at last develop a decarbonisation strategy, something it has long been under pressure to do.

Last month at the COP23 climate summit in Bonn, Germany, Carbon Brief spoke to Edmund Hughes, the IMO’s head of air pollution and energy efficiency, about the development of the organisation’s new climate strategy.

In the wide-ranging interview, Hughes also addressed how shipping can hope to align itself with the 1.5C goal of the Paris Agreement when the IMO is facing accusations of “corporate capture”.

Strategy

The IMO has struggled to make progress on tackling its emissions since it was first mandated by the international MARPOL convention to clean up the sector in 1997. The IMO’s last greenhouse gas study, published in 2014, showed that emissions are likely to grow significantly as global demand for trade continues to rise.

International shipping was not included in the final text of the Paris Agreement, but Hughes tells Carbon Brief the IMO and its member states recognise that it has to make efforts to contribute to the Paris goals.

The IMO has promised to lay out its “initial” climate strategy in April 2018, with a final revised version set to come out in 2023. Earlier this year, delegations from around the world met at the IMO headquarters in London and agreed a seven-point plan for a draft of the strategy.

Seven-point draft strategy for reducing greenhouse gases agreed by the Marine Environment Protection Committee (MEPC) in July.

A set of seven strategic directions for 2018-2023, adopted earlier this week by the IMO Assembly, also included one on developing solutions to minimise shipping’s contribution to climate change.

Carbon Brief asked Hughes about what kind of strategy the IMO is developing for decarbonising shipping. He said:

“We’re a regulator…so we develop mandatory rules that ships have to comply with, and we’ve done that for technical and operational aspects of shipping. The strategy that’s being developed now…is really looking at what further measures can be undertaken.

“Now the initial strategy, it’s a good question what will be in it, but there was agreement last July that there should be a sort of outline, a draft outline structure. That would include, importantly, obviously, sort of preamble introduction context, but very importantly, a vision of what the sector and where the sector should be going this century, essentially, in terms of its carbon emissions.”

Hughes said there is a suite of measures being considered, including both mandatory measures (see below) and voluntary measures, such as the need for more research and development on innovative technologies, and low-carbon alternative fuels.

Concrete target?

When asked whether the new strategy will have any concrete emissions reduction targets, Hughes said that is still part of the discussion. He said:

“The negotiation is looking at the various options that could be used to provide a target…If we have, for example – and thinking hypothetically – a vision that says ‘we need to remove, reduce all CO2 emissions from international shipping within this century’, or ‘by the end of the century’ or ‘in the second half of the century’, or whatever words you want to use…well, then you need to have an ambition that matches that target. That ambition then has to set goals and objectives, or, as has been referred to me, aspirational objectives.

“But when we look at setting targets for international shipping, whatever we do, there has to be a recognition also that currently…what [shipping] uses as its fuel: hydrocarbon fuel, liquid hydrocarbon fuel mainly. We use over 300m tonnes a year of bunker fuels…and we have to somehow replace those bunker fuels with some other [sustainable fuel or innovative technology].”

1.5C

Today’s Tony de Brum declaration reiterates a commitment to the Paris Agreement’s goal of both holding global temperature rise to “well below” 2C and “pursuing efforts” to limit warming since the pre-industrial era to 1.5C.

Its signatories “confirm that international shipping, like all other sectors of human activity, must take urgent action in consideration of these vital objectives”.

Speaking to Carbon Brief about the 1.5C goal last month, Hughes said that while the IMO has received proposals from some countries that it should align itself with the Paris Agreement’s 1.5C goal, not all governments necessarily agree with this. He said:

“We work by consensus in the IMO and we seek agreement across with all governments, because that helps us move forward, particularly with this initial stage of the strategy, it’s important that everyone feels that we’re starting on the right place.

“In terms of the goal, 1.5C is ambitious for everybody, frankly, at this stage now. We recognise that, but also we recognise that those countries who are most at risk from climate change really need to see action. And, in fact, the [IMO working group on greenhouse gas emissions] that met just a couple of weeks ago [in October] recognised that, to a degree: […] it supported the need for early action. So it’s how you do it now, and again what is appropriate for the shipping sector.”

Corporate influence

In October, the NGO InfluenceMap published a report accusing the shipping industry of aggressively lobbying the IMO to obstruct climate change action for shipping.

This lobbying has ensured shipping remains the only sector in the world not currently subject to any emission reduction measures, InfluenceMap said.

The report singled out three industry trade associations – International Chamber of Shipping (ICS), the Baltic and International Maritime Council (BIMCO) and the World Shipping Council  – as having collectively lobbied to delay implementation of any climate regulations.

InfluenceMap also found that 31% of nations were represented in part by direct business interests at the most recent IMO environmental committee meeting. The report said:

“The IMO appears the only UN agency to allow such extensive corporate representation in the policy making process.”

All three trade bodies have denied they are obstructing climate action. WSC says it has offered concrete proposals for both short- and long-term carbon reduction and co-sponsored a proposal to reduce CO2 emissions, although this did not include binding sector-wide greenhouse gas emissions reduction targets. Similarly, ICS’s director of policy and external relations, Simon Bennett, says the shipping industry, in fact, played a large part in persuading IMO member states to develop a strategy to reduce emissions following the adoption of the Paris Agreement.

Carbon Brief asked Hughes to respond to concerns that business interests are overly represented in the IMO. He said:

“Well, we have formally responded [to these claims]. We’ve made clear that the delegations is a matter for the governments who attends IMO… It’s not [the secretariat of IMO] who decides who attends. It’s up to the governments to decide.

“We have about 70 observer organisations who attend IMO and they come from a range representing the industry, representing environmental NGOs, representing the seafarers, another important component of our work…

“It would be strange, frankly, if an international regulator, for a sector like shipping, didn’t have industry representation providing input. They have a lot of the technical understanding of the shipping sector: ships are highly technical machines…To say we’ll be able to operate as a good regulator without input from the industry, I’d be surprised.”

Non-discriminatory principle

In contrast to the United Nations Framework Convention on Climate Change (UNFCCC), which recognises the principle of “common but differentiatedresponsibilities” (often referred to as “CBDR”) and capabilities depending on different national circumstances, the IMO has a non-discriminatory guiding principle. This talks about “no more favourable treatment”, with every ship treated the same.

The IMO is still making efforts to reconcile those two principles, Hughes told Carbon Brief:

“It’s very important we do so because, obviously, the developing countries want to see whatever [emissions reduction strategy] the IMO develops…recognise the CBDR principle. But, at the same time, the way we regulate shipping, international shipping, is to say ‘well all ships are the same’. So, that’s one of the areas where we’re having to work quite hard to try and get a compromise…

“This is a very important principle we have, because if ships were treated differently based on their flag state, the country on which they’re registered, then you would undermine, frankly, the whole international regulatory regime. Because why would anybody go under a flag statewhere they were having greater regulations imposed on them than another flag state…

“That’s not like a power station or a cement factory, so it’s much harder to say ‘well we’re going to control you’. So, we have to get agreement that all ships will have to comply…Otherwise we could suffer from things like carbon leakage, which again we want to ensure that any measures, we don’t have those sorts of problems.”

Technical measures

The IMO has implemented some carbon cutting measures in recent years, said Hughes. The mandatory Energy Efficiency Design Index (EEDI), for instance, currently requires new ships to be 10% more energy efficient than they were in the baseline 2000-2009 period. This will be pushed up to 20% in 2020 and 30% in 2025.

However, this is just for new ships. With 40,000 to 45,000 ocean going ships currently in use and with 1,000-2,000 new ones built each year, it will take decades to change all those to newer, more energy efficient ships. “It is a problem, I’m not going to deny it, that is a challenge,” said Hughes.

The IMO has also developed the Ship Energy Efficiency Management Plan (SEEMP) which aims to make the existing fleet more energy efficient in the way it operates, such as making sure the ship is set up correctly in the water, keeping the hull clean and using different operational practises, such as weather routing, says Hughes.

An oil consumption monitoring programme is also set to be introduced next year. From 2019, ships over 5,000 tonnes will have to collect data on the fuel oil they consume and report on it through their flag state to the IMO. Data on things such as distance and time travelled will also be collected.

The IMO also has several programmes geared at building technical cooperation and capacity building.

But Hughes insisted the IMO recognises these measures can only go so far. “If we’re going to sort of go further we have to look at other measures, and that’s part of the discussion now,” he said.

The IMO has also begun to look at market-based measures again, which stalled in the years ahead of the Paris Agreement due to fears of the impact it would have on economies. Hughes said:

“We’ve restarted that discussion now. In fact, when you look at the draft strategy, we have short, medium and long-term measures being proposed in there. And, in the medium term, they’re referring to market-based measures again. So we are trying to move forward, but it needs everyone to work together and understand some of the issues. And the impacts on states have to be recognised.”

Hopeful?

Carbon Brief asked Hughes if he is hopeful that a greenhouse gas reduction agreement can be reached at the IMO and whether he thinks, ultimately, shipping will limit its emissions. He said:

“I am. Because I think, as we see with the Paris Agreement, people recognise we are on a pathway now for…decarbonisation of the global economy. And I think that’s recognised by the governments.”

“But if somehow people could satisfy the negative risks – and the negative risks can be properly mitigated – then I think we can move forward…You know we have an expression, throw the baby out with the bathwater: international shipping is an important sector for global trade. I mean that’s fundamentally what we’re there for; we support global trade. And now 60% of global trade is done by developing countries, those countries have to be confident that there’s not going to be an impediment to their sustainable development.”

“Some companies are very keen on improving their carbon footprint…Fuel is over 50% of the operating cost of a ship. So companies who can see a reduction in fuel costs through, for example, energy efficiency measures, can improve their profit.”

Ports of Auckland inquiry outline handed to ministers

NZ First wants more ships going to Northport, Whangarei.

NICK UNKOVICH/STUFF

NZ First wants more ships going to Northport, Whangarei.

Government ministers are considering the terms of reference for an official inquiry into moving the Ports of Auckland operations to Whangarei.

NZ First campaigned on the idea and the feasibility study was a key part of its coalition agreement with Labour.

The terms of reference are understood to involve a greater role for rail, ensuring New Zealand has better negotiating leverage with international shipping companies, and NZ First’s commitment to a structure that would stop direct competition between the New Zealand ports and instead encourage more co-operative model in which they all work in the country’s national interest.

Shane Jones has sweeping powers under his regional economic development ministerial portfolio.

KEVIN STENT/STUFF

Shane Jones has sweeping powers under his regional economic development ministerial portfolio.

No names have yet been discussed to chair the inquiry, so the terms of reference are unlikely to be finalised before Christmas. It is understood that several people have been appointed to be part of the inquiry board, and Ports of Auckland is lobbying to have its interests represented among the board’s members.

Auckland Mayor Phil Goff and Regional Economic Development Minister Shane Jones held a meeting about the inquiry on Friday morning.

Auckland mayor Phil Goff's council coffers receive around $50m from the Ports of Auckland every year.

SIMON MAUDE/STUFF

Auckland mayor Phil Goff’s council coffers receive around $50m from the Ports of Auckland every year.

It comes six weeks after Goff wrote a letter demanding the inquiry consider national, regional and Auckland interests.

Jones has been given oversight of KiwiRail, which gives him power over decisions about the railway line that would serve the Whangarei port.

The port is worth about $50 million a year to the Auckland Council, and although Goff has said it will have to move from the Auckland CBD eventually, he would like to see it remain within greater Auckland.

The council wants to disestablish Auckland Council Investment (ACIL), the council-controlled organisation that manages its major investments.That would give it more hands-on control of the Ports of Auckland board. ACIL manages $2.3 billion of assets but operates with a skeleton staff.

Jones said: “I accept there is a measure of scepticism around yet another review about our ports. What I want to emphasise is it will not be a Clayton’s review. It has to be fair to the stakeholders of Port of Tauranga, Ports of Auckland and Northport.

“But this is a government that had put in its coalition agreement that there would be serious consideration going to a more enhanced role of Northport in relation to Ports of Auckland.”

Jones said he would ensure KiwiRail was involved in discussions about the port move.

He said Treasury was still undertaking an analysis of the role KiwiRail would play in the transport network, alongside rail corridor owner the NZ Railways Corporation.

The inquiry’s terms of reference were now being considered by ministers. “Once the full Cabinet has endorsed the terms of reference, a public statement will be made.”

Goff would not get into detail about the meeting with Jones.

“We talked about the broad terms of reference for the study into the Upper North Island Ports and Supply Chain Strategy.” Goff said.

Goff said he’d spoken to Jones about it before and, on Friday, they discussed his letter.

“It makes sense that the decision we make about the Ports of Auckland meets the needs of the city, the region and the country,” Goff said, adding that it also had to make economic, environmental and social sense.

“I expressed my expectation that whatever happens in the future with the port needs to have a strong business case behind it and be evidence driven. We need to be looking at how the ports – Northport, Auckland and Tauranga – could best work together and what the infrastructure requirements are,” Goff said.

He said the inquiry was not ideologically driven and that he and Jones were both prepared to consider options. “We’re not going into it with a conclusion and working backwards.”

Goff also noted that any decision about the future of the port was an important financial investment decision for the people of Auckland.

Northport and Ports of Auckland refused to comment. Northport is already working through its own expansion plans.

 – Sunday Star Times

An engineering marvel: Lyttelton Railway Tunnel turns 150

Lyttelton Rail Tunnel, seen here in the old Illustrated Press, 
opened in 1867 to join Christchurch and the port.

Press Archives
Lyttelton Rail Tunnel, seen here in the old Illustrated Press, opened in 1867 to join Christchurch and the port.

Imagine arriving fresh to New Zealand at Lyttelton and disembarking from a ship with all your worldly belongings, ready to start a new life in a blossoming little town called Christchurch.

You’ve travelled for months to get to your new home, but this final stage throws up one of the trickiest parts of the journey – a long, arduous scramble over the steep Bridle Path of the Port Hills or a perilous journey by small boat across the Sumner bar to Ferrymead.

The idea would be enough to put anyone off.

The tunnel under construction, with provincial engineer, Edward Dobson in his distinctive white top hat, to the right of ...Press Archives

The tunnel under construction, with provincial engineer, Edward Dobson in his distinctive white top hat, to the right of the tunnel entrance.

But while the hills were an inconvenience for travellers, for businessmen desperate to export Canterbury’s goods to the rest of the world they were a major hindrance with the potential to cripple the market.

The region’s early settlers realised this, and almost as soon as they’d poured off the Four Ships there were murmurs of building a tunnel through the hills.

Steam engines replaced the electric locomotives on the Lyttelton line during repairs to the overhead equipment at ...

Press photographer
Steam engines replaced the electric locomotives on the Lyttelton line during repairs to the overhead equipment at Woolston in August 1932.

The idea was mooted in the early 1850s, but political wrangling proved a stumbling block as conservative colonists condemned it as financially reckless and an unnecessary extravagance.

Chief among the opposers was James FitzGerald, a former superintendent of Canterbury province who dismissed it as ill thought-out and unaffordable.

But his successor William Moorhouse, elected in 1857, was a great advocate.

Heavy rails on the curve at the entrance to the Lyttelton tunnel were replaced with new ones in 1933 after the weight ...

Press photographer
Heavy rails on the curve at the entrance to the Lyttelton tunnel were replaced with new ones in 1933 after the weight and speed of electric locomotives caused considerable wear.

“Railway Billy” asked the council to “consider and determine the best method of securing safe and expeditious transit of our marketable productions to the place of export”, and in October 1858 a decision was made to built New Zealand’s first railway tunnel and the first in the world to pass through the side of an extinct volcano.

Work began in 1860 but the British contractors demanded more money and gave up when they hit rock.

Undeterred, Moorhouse sailed to Melbourne and recruited new contractors.

The first locomotive and train in New Zealand, at Heathcote in 1863.

Press Archives
The first locomotive and train in New Zealand, at Heathcote in 1863.

The actual building work fell to Edward Dobson, Canterbury’s provincial engineer, who opened up access cuttings at each end of the tunnel.

Educated at university in London, he had studied the new Belgian railway system and brought his knowledge to New Zealand.

David Welch, an historian who has written a book about the tunnel, Port To Plains, said Dobson’s brilliance was key to its success.

Heathcote Valley rail station, signal box and the rail tunnel to Lyttelton, January 1981.

The Press
Heathcote Valley rail station, signal box and the rail tunnel to Lyttelton, January 1981.

“To me, he is the real hero of it all,” he said. “We were very lucky to get such a multi-faceted engineer. He was hugely influential.

“At the time railways were pretty new – there was no railway line in New Zealand when they started building the tunnel, and it was still pretty new technology in a way.”

Work was arduous to say the least, with progress at a painstaking three metres a week.

Lyttelton railway tunnel is just as important today as it was 150 years ago, with over a million tonnes of coal being ...

Lyttelton railway tunnel is just as important today as it was 150 years ago, with over a million tonnes of coal being freighted through every year.

Miners attacked the face with pick and shovel, using gunpowder to bring down rock that was then carried away by horse-drawn wagon.

More rock had to be excavated than was expected, the tunnel was incredibly stuffy and ventilation shafts had to be put in to allow workers to breathe.

It was also very wet – so bad that in one stretch a cover had to be built to protect miners.

Welch said: “At one stage there was 50,000 gallons a day pouring off the rock face above them … They couldn’t get rid of the water and had to bucket it out in big wooden vats.”

Despite the conditions there were few injuries, with just two deaths during an explosion.

Eventually, on May 24, 1867, the two holes being bored from each side met and an iron rod was passed through. A few weeks later the public were able to walk the entire length of the tunnel.

The Lyttelton tunnel was officially opened for passengers on December 9, the journey taking seven minutes – a far cry from the struggle over the Bridle Path.

But the tunnel wasn’t quite finished – workers still had to shape the inside, finally completing it in 1874.

It eventually contained 1.5 million bricks and cost 195,000 pounds to build.

KiwiRail engineer Trent Ludlow said it was a “massive achievement”, given its complexity.

He said: “Strategically for Christchurch, when you look at the challenges they had in getting their goods in and out, without that tunnel it would have really restricted the growth of the city.”

The tunnel was crucial for Christchurch and the success of the Lyttelton port, carrying both goods and passengers between the two.

And its role has changed little in 150 years, trains carrying 1.1 million tonnes of coal, 300,000 tonnes of logs and up to 80,000 containers through the tunnel every year.

“For us it is a vital link for us, so good-on the forefathers for having that vision,” Peter Davie, the port company’s chief executive said.

“As the rail tunnel was established it allowed Lyttelton to develop as a deep-water port. That was the primary issue – we didn’t have a deep-water port in Canterbury.

“It really opened up the region for trading.”

Today, up to nine trains a day travel through the tunnel, all now carrying freight after the 2010 and 2011 earthquakes.

 – Stuff

Big step ahead in new Napier wharf plan

THE PLAN: The proposal for a new wharf and dredging to cope with ships over 350m long and huge increases in cargo expected over the next decade. IMAGE/NAPIER PORT

Napier Port has reaffirmed its plans for its biggest-ever investment by lodging a resource consent application with its owners aimed at building a new wharf stretching 350 metres and able to cope with some of the longest ships in the World.

The application was lodged with the Hawke’s Bay Regional Council yesterday, a year and a half after the port company — once run by a harbour board elected by the public — first announced its plans for a project which with the dredging necessary is expected to cost about $125 million.

A timeline is not yet clear however, although the port expects a near 50 per cent increase in cargo by 2026 and that once the application process is completed it will complete a business case to establish the optimum time to begin construction which it is estimated will take about two years.

The lodging of the application follows large amounts of scientific research and almost two-years of pre-consultation, involving input from about 2000 people.

It includes 17 specialist studies on potential impacts on the ecology of the sea floor and Pania Reef, dredging, waves, surf breaks, noise, traffic and cultural values.

It now needs to be reviewed by the Regional Council before public notification and assessment by independent commissioners, and consent would allow the wharf to be built when cargo demand and increasing ship size warrant it.

Napier Port chairman Alasdair MacLeod said with expected cargo volume growth, and indications ships as long as 360 metres could be stopping at Napier within the next five years, the company needs to develop its facilities to handle that growth on behalf of the region.

“Napier Port is critical to Hawke’s Bay’s economy – we’re associated with 27,000 full and part-time jobs and more than half of the gross regional product,” he said.

“Until now, we’ve been able to handle the steady growth in cargo across our existing wharves. However, Hawke’s Bay’s economy is thriving and eventually we’ll need a sixth wharf to meet cargo demand and cater for the larger ships coming to New Zealand.”

While the new container wharf and dredging of the shipping channel to handle larger ships will cost about $125 million, about $275 million needs to be invested to ensure Napier Port remains relevant and competitive, Mr MacLeod said.

Due to steady growth and the need for investment in recent years, Napier Port’s debt at the end of its 2017 financial year was $83 million, and the funding of the development will need a reduction of that debt by either requesting dividend relief from the Hawke’s Bay Regional Investment Company (which is owned by the Regional Council), or securing additional investment, Mr MacLeod said.

Environmental consideration include a plan to move a proposed dredge material disposal 5km offshore, rather than using an inshore site with existing consent for maintenance dredging programmes.

Napier Port has a feedback portal on its website to answer any questions or hear further views from the community.

Maritime drug testing and Chathams shipping plans changed

The new Government has reversed plans for a mandatory maritime drug and alcohol testing regime and allowing foreign flagged ships to carry freight to the Chatham Islands.

MPs debated the Maritime Transport Amendment Bill tonight which was reinstated from the last Parliament.

The Bill originally proposed commercial maritime operators to have drug and alcohol management plans, including random testing for staff carrying out safety sensitive activities.

The select committee report (written by a National Government dominated committee) inserted the mandatory drug testing regime on top of this, as well as the Chatham Islands proposals, which were then opposed by Labour and Green MPs on committee.

National MP Jami-Lee Ross said the new Government’s amendments to remove the mandatory drug and alcohol testing regime were a step backwards on safety.

The Minister in the Chair – Julie Ann Genter – said the law would still allow for drug and alcohol management on ships. This included testing in the work place in some circumstances and for testing following an incident. The Authority could also ensure testing took place if it was felt to be needed.

She said a mandatory drug testing framework was unnecessary and would impose large unnecessary costs on small operators.

Ross said NZ First had supported the mandatory testing regime in the last Parliament, but Genter said all Government parties supported the latest changes.

The select committee had also proposed allowing foreign-registered ships to carry freight to New Zealand’s offshore islands – in effect the Chatham Islands.

In select committee National had argued this would make freight to and from the islands cheaper through competition. The Labour and Greens minority report said “We heard compelling evidence from Chatham Islands Shipping Ltd that there are insufficient freight volumes to the Chatham Islands to make more than one service economically viable. Opening up the possibility of foreign flagged vessels to run a service could undermine the financial viability of the current not-for-profit trust, and could eventually result in a private monopoly by a foreign registered vessel. It could also undermine the provision of a reliable shipping service to the Chathams, threatening the livelihoods of the small, isolated population.”

Debate on the Bill’s committee stage was interrupted.

Amazon will be a game-changer

New Zealand’s e-commerce boom and the arrival of Amazon in Australasia will accelerate demand for warehouse space in Auckland, and drive the redevelopment of inner-city brownfield sites into “last-mile” delivery centres, says Scott Campbell, national director, industrial and logistics for Bayleys Real Estate.

This country’s annual online retail spend is estimated to be $4 billion, and though  online shopping represents a relatively small proportion of overall retail spending in New Zealand it is growing at a faster rate than bricks and mortar retail.

Campbell says the growth in e-commerce has forced retailers to reassess their property requirements.

“To fulfil customers’ orders quickly, they need warehouses, with international studies showing that ecommerce businesses need three times as much warehouse space as traditional brick-and-mortar retailers.

“Industrial property in New Zealand is already in high demand, as evidenced by the fact the sector comprised 56 per cent of commercial property sale transactions in 2016 in the country’s largest market of Auckland. E-commerce has the potential to turn it into the hottest component of commercial property market.”

Amazon’s entry into the Australian market is set to be a game-changer for retail in the region. The company announced in August that it is opening a 24,000sq m fulfilment centre on the outskirts of Melbourne, and has committed itself to “fast delivery”.

Amazon has not said whether it will establish a presence in New Zealand, but brokerage firm Forsyth Barr has advised its clients that New Zealand presents a logical extension to Amazon’s investment in the region.

Campbell says location is the key to success. “To stand out in a crowded market, retailers are competing aggressively on reducing delivery times, which is creating increased demand for last-mile logistic,” he says.

E-commerce fulfilment is in its infancy, really, and there are a lot of different strategies being employed. One of the more popular approaches is the “hub and spoke”, whereby a main distribution centre — the hub — sends out material to smaller centres — the spokes — for last-mile delivery. Scarcity of land favours this approach.

True Commercial - Amazon fulfilment centre in Germany.jpg

One of Amazon’s giant fulfilment centres in Germany. Photo / Supplied

“Overseas, retailers are increasingly seeking out warehouse space close to consumer hubs and residential centres. And since competition for land in these areas is fierce, warehouses will need to grow upwards rather than outwards to accommodate stock, as many in Asia already are. For same-day deliveries, smaller distribution centres will spring up near CBDs.”

Campbell says we can also expect warehouses to assume some of the characteristics of stores as more retailing activity starts to happen inside distribution centres.

“It’s easy to write-off warehouses as just big boxes or sheds, but they can be technology-rich and sophisticated in their use of space. For example, some logistics premises offer no-aisle-racking — whereby the product is dropped down on to a buggy for automatic transfer to the staging/loading area.”

New Zealand retailers are already responding to the disruption in the industry. The Warehouse Group — which includes The Warehouse, Warehouse Stationary, Noel Leeming and Torpedo7 — recently partnered with NZ Post to trial a new shipping service for online shoppers, Shipmate, as part of its push to drive e-sales. NZ Post’s network gives it significant last-mile delivery reach and it is talking to a wide range of companies about partnering opportunities.

Already, it handles logistics for food delivery service My Food Bag.

“More and more New Zealand brands are seeking to do business with us on e-commerce projects,” says a NZ Post spokesperson. “We have more than 1.9 million delivery points across the country. We operate in a highly competitive market.”

The launch of Shipmate follows NZ Post’s opening of two processing facilities for logistics services. The 2500sq m Taranaki Operations Centre is  a  hub for the Taranaki region while the purpose-built 14,600sq m,  $8m Southern Operations Centre at Christchurch Airport’s Dakota Park, is a  hub for the South Island.

Other large logistic facilities include the 35,000sq m centre in Highbrook, South Auckland, operated by  Courier Post.

“That facility also has a satellite pick-up location closer to Auckland city in Morningside, which is likely to become a popular location with other logistics-type operators as large land parcels for large format developments open up across South Auckland, including the Airport Corridor, Wiri and Drury,” he says.

Campbell says competition for land in desirable locations, coupled with the push for last-mile deliveries, will encourage developers to transform  land and warehouse stock in brownfield sites into more modern facilities. “Brownfield sites in Mt Wellington, Penrose and East Tamaki will be ripe for regeneration,” he says.

Listed property group Goodman says it is intensifying its industrial development programme, and undertaking a significant proportion of new projects on an uncommitted basis, “to address current capacity constraints and to meet forecast demand”.

Logistics companies form around 30 per cent of Goodman’s customer base in New Zealand and occupy more than 300,000sq m of space within its portfolio.

Chief executive John Dakin says modern distribution warehousing needs to be in the locations close to the end consumer and this is one of the reasons  Goodman’s is focusing its industrial portfolio in Auckland.

He predicts distribution warehouses will evolve as online retail sales grow. “Existing third party logistics businesses with good distribution channels and/or specialist services will benefit but competition will intensify. We also expect that infill locations, close to consumers and key infrastructure will become increasing sought after,” Dakin says.

China Launches World’s First All-Electric Cargo Ship, Will Use It To Haul Coal

Here’s the good news: China has launched the first all-electric cargo ship. According to China Daily, the 230 foot long vessel is equipped with a 2,400 kWh lithium-ion battery that stores enough electrical energy to transport 2200 tons of cargo a distance of 50 miles on a single charge at a top speed of about 8 miles per hour. Time to recharge the battery is given as 2 hours, which is approximately the time needed to unload the ship at its destination.

electric cargo shjip

Photo credit: China News/Peng Yonggui

“As the ship is fully electric powered, it poses no threats to the environment. The technology will soon be likely … used in passenger or engineering ships,” said Huang Jialin, chairman and general manager of Hangzhou Modern Ship Design & Research Co, which designed the electric cargo vessel. The battery for the ship is comprised of 1,000 individual lithium-ion packs. Adding enough power to carry more cargo is simply a matter of adding more battery packs.

The ship was built at Guangzhou Shipyard International in Guangzhou, the capital of Guangdong province, which is located on the Pearl River north of Hong Kong. The shipyard is a wholly owned subsidiary of CSSC Offshore & Marine Engineering Company. CSSC stands for China State Shipbuilding Corporation.

The new ship has two primary benefits. First, it will emit no carbon emissions while underway. Cargo vessels tend to be some of the biggest carbon pollution sources in the entire transportation sector. Second, it will lower the cost of transportation for bulk cargoes because the price of electricity is lower than the price of diesel fuel

Here’s the bad news: The all-electric cargo ship will be used primarily to transport coal to generating stations along the Pearl River. So, imagine this — the world now has a ship that can claim to be zero emissions even though it is powered by electricity generated by burning coal, one of the dirtiest of fossil fuels in terms of carbon emissions, and is used to transport coal more cheaply.

“This kind of ship takes into consideration the harmony between humans and nature and can protect water quality and marine life, and should be copied by other ships sailing on local rivers,” says Chinese environmentalist Wang Yongchen. That much is correct. The same technology that makes the new electric collier possible can also be used to power ferries, container ships, or other vessels used for short haul coastal shipping.

The Chinese should be applauded for advancing the idea of electric propulsion for ships, but using clean power to lower the cost of shipping coal to electric generating plants illustrates how far the world has to go before a zero-emissions world becomes a realistic possibility.

Rail has saved New Zealand $1.5 billion a year, study shows

Transport Minister Phil Twyford said the report showed the benefits of investing in rail.

STUFF
Transport Minister Phil Twyford said the report showed the benefits of investing in rail.

New Zealand’s rail network has save the country $1.5 billion by reducing congestion wait times, accidents and emissions, a report has found.

The total cost avoided by having passengers off the roads and on rail was $1.19b alone, according to consultancy firm EY.

Their report was produced in 2016, commissioned by the New Zealand Transport Agency (NZTA) but the former government never released it.

A year-old study, just released by the Government, shows $1.5b in savings of congestion and safety incidents, by having ...

STUFF
A year-old study, just released by the Government, shows $1.5b in savings of congestion and safety incidents, by having a rail network.

New Transport Minister Phil Twyford said the study supported further investment in rail, and reinforced the Government’s plans to do so.

EY found the net benefits provided by passenger rail amounted to $1.2b in savings from reduced congestion, $8.2m in safety benefits and $3m in reduced emissions.

For freight, there was an estimated total net benefit of $354m.

“The implications of these findings for passenger rail is that the support it receives from subsidies (central and local government) is highly likely to be acceptable because passenger rail is calculated to add significant value by reducing congestion on Auckland and Wellington’s arterial roads,” the report said.

“The implications of these finding for freight rail is that the Government funding it receives is likely to be acceptable as the total benefits (both quantitative and qualitative) could be greater than the Government support it receives.”

However, the study had a number of limitations across all measures, said EY, and a more analysis was needed to confirm freight rail’s benefits outweighed the subsidies afforded it by Government.

The study also broke down the time delay costs for the two major cities; Auckland and Wellington.

In the capital, it found that even with its passenger rail system, 19.8m hours worth of congestion came in at a cost of around $303m in time delay. In Auckland, the traffic situation was more complex.

The net time delay cost was about $882m, and the report’s writers said that represented an 57m extra vehicle hours on Auckland roads.

Twyford said rail was a “great way to travel and move cargo”.

“It takes both passengers and freight off the roads, improving the travel experience of road users and reducing their costs.”

The Government would “restore balance” to transport funding and boost investment in rail infrastructure both for passengers and freight.

“This will include significant investment in regional rail via the Regional Development Fund, as set out in the Labour-New Zealand First coalition agreement.

“The establishment of a light rail network in Auckland will significantly increase the $1.3b a year of benefits that road users, including freight companies, experience from reduced congestion,” Twyford said.

STACEY KIRK – Stuff
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