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NZ carbon dioxide shortage severe

In brief

  • Greenhouses, meat preservers, and especially smaller beverage producers have been hit hard by NZ’s CO2 shortage.
  • NZ currently cannot produce large quantities of the gas and is importing it from Malaysia, causing huge price increases.
  • This was caused by the closure of Marsden Point oil refinery and the temporary shutdown of the only other CO2 producer.

Supply flattened

New Zealand is currently suffering from a lack of stored carbon dioxide (CO2), because the country’s sole producer shut down on 22 December 2022. The Todd Energy plant, in the Kapuni natural gas field in Taranaki, stopped production due to safety concerns. Due to the age of the equipment, it took almost a month to locate an ammonia leak. It’s expected to be running again at 30% capacity around 6 February 2023, ramping to full capacity by the end of the year.

CO2 is now imported from Malaysia, at great expense due to the heavy pressurised liquid canisters used for transport. Supply is being rationed, with buyers paying a lot more, often 4-6x higher prices. There are extreme examples that are a lot worse.

Why is NZ so vulnerable?

Until late March 2022, 70% of NZ’s CO2 was produced by the Marsden Point oil refinery, near Whangarei, and 30% by the Kapuni plant. The oil refinery was opened with government subsidies from the National Government in the early 1960s to increase the country’s independence, and was privatised by Labour in 1988. It always had low margins, and after COVID lockdowns greatly reduced demand, NZ Refining said it wasn’t profitable enough to keep running. 

Government decided not to rescue it, and Cabinet was warned the closure would reduce fuel security and put pressure on industry to source sulphur, bitumen and CO2, without enough time to invest in alternative production.

The loss of CO2 supply from Marsden Point impacted many industries. Unfortunately it coincided with planned maintenance of the Kapuni plant, which slowed its generation in June, raising prices further.

A useful vapour

Carbon dioxide is now prioritised for safety uses like hospital ventilators, extinguishing fires, and regulating acidity in water treatment.

The effervescent gas is used in food preservation, and the shortage has increased the cost of producing preserved meat and packaging meat for export. The wine and dairy industries also use it but are so far relatively unaffected.

Greenhouses use the gas to accelerate growth, and started looking at an alternative creation method. NZ Gourmet, one of NZ’s largest fruit and vegetable growers, said CO2 prices increased its costs by tens of thousands of dollars a week.

Supermarkets say the shortfall hasn’t hit food prices – yet.

Bubble costs inflate

CO2 is used to make fizzy beverages such as beer, bubbly, and soft drinks. NZ’s largest brewers make their own CO2, but the craft brewing industry was crippled. Mike O-Donnell, chairman of craft brewer Garage Project said in July 2022:

Local businesses are now able to access less than half the food grade CO2 they used to, and at over twice the price of a few years ago with virtually all of it originating from a single throttled back plant. No surprise that businesses are hurting.

One anonymous beverage manufacturer says they are now paying 17x more than in April 2022.

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