The Government's billion-dollar frigate question

Sailing from Wellington Harbour on Wednesday morning was a 5,500-tonne example of what could be a multibillion-dollar Budget item for the Government in the coming decade.

The JS Kumano, a Mogami-class frigate, visited Wellington this week.

The 130m-long JS Kumano, a Japanese Mogami-class frigate built for stealth with flat steel panels and few distinguishable features other than a sensor-filled mast and 54-calibre cannon at its bow, spent four days tied up at Wellington’s wharf this week.

The timing, more than a week out from the Budget, was auspicious.

Earlier this month, in a clear signal that frigate procurement may feature in the May 28 Budget, Defence Minister Chris Penk announced that Cabinet had chosen two frigate types for future procurement: the Japanese-built Mogami and the British-built Type 31. Penk – who toured the JS Kumano on Tuesday evening – is expected to make a pre-Budget announcement at Devonport Naval Base on Saturday, where the refurbished but decades-old HMNZS Te Mana and Te Kaha frigates operate from.

Replacing these two Anzac-class frigates from 2034 is part of a broader maritime fleet renewal project. A business case for what will be a years-long frigate procurement is expected to be produced by the Defence Force by the end of 2027. Among the key questions the Government needs to answer: how many frigates will New Zealand seek to buy?“It's an ongoing discussion … I can’t provide that answer at the moment,” Penk said on Tuesday.

He declined to discuss the qualities of either the Mogami or Type 31 but said there were “good arguments” for either class of frigate.

JS Kumano crew stand beside the vessel's 54-calibre cannon. (Image: Thomas Manch/BusinessDesk)Futuristic combatantBusinessDesk took a tour of both JS Kumano and HMNZS Te Mana after they arrived at Wellington’s port on Sunday.

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On display on the Mogami frigate was its unmanned underwater vehicle used to find mines, a boat docked in the rear that deploys to destroy mines, a Seahawk helicopter, and Mark 46 torpedo tubes for targeting other vessels.

Not permitted for viewing, however, was a sophisticated Combat Information Centre somewhere inside the ship, where crew sit in front of computers within a ring of large screens and control the vessel and its weapons systems.

Standing before the “beautiful ship”, NZ Defence Force maritime component commander Commodore Shane Arndell said its visit was a chance for people to see “what a future combatant might look like in terms of something we could potentially purchase”. Te Mana was in Wellington in part to prepare for a deployment to Hawaii for the Rimpac military exercise, and then onwards to North Asia to participate in a United Nations sanctions effort against North Korea.

Maritime component commander Commodore Shane Arndell and JS Kumano Commander Okumura Kenji. (Image: Thomas Manch/BusinessDesk)Australian Mogami or British Type 31Arndell, who is charged with fleet command and readiness, said the current replacement timeline for the two existing frigates was 2034 and 2036. Defence was “early in the discussion phase at the moment”. “What's really important for us is not so much the platform, it's more around the supply chain, it's around the partnering with a like-minded nation, you know, ‘What have we got in the region, where can we balance off each other in terms of capability?’"In April, the Australian Government signed contracts for the upgraded, second-generation Mogami frigates, which are longer at 142m and heavier at 6,200 tonnes than the JS Kumano, as part of Canberra's $20 billion, 10-year renewal of its combatant fleet.

The first three Australian Mogamis will be built by Mitsubishi Heavy Industries in Japan, and the following eight are planned for Western Australia.

NZ was therefore effectively choosing between Australia and Britain. “In terms of alignment and the whole logistics piece, the whole being able to sustain those vessels and work with partners, it would make sense for us to be going to the second generation, same as what Australia's got,” Arndell said of the Mogami.

The HMNZS Te Mana was also at Wellington's wharf this week. The Mogami frigates required a crew of only 90 to operate, which Arndell said was a “transformational mindset” for the NZ Navy, whereas the current frigates are crewed with 180 personnel.

This was also “good in this day and age, where we are challenged with people wanting to join the armed forces”. The Type 31 is being built by Babcock, which already has a long-running contract as the maintenance partner for the Navy and two years ago began pitching the Type 31, or Arrowhead frigate, as a replacement for the Anzac frigates. A Type 31 would not visit New Zealand before the Government made a decision, Arndell said, as the first build of this variant had not yet been completed. Defence Force staff would head to Scotland to assess the vessel.

Two British ministers have visited NZ in the past year and made an effort to pitch the Type 31. BusinessDesk interviewed Minister of State Sir Chris Bryant when he visited in November and questioned the viability of a Northland dry dock project also being pursued by the Government, unless Babcock was chosen for both the dock and the frigates.

Arndell said the Defence Force had contributed to the dry dock process, but that this was being run separately by the Ministry of Business, Innovation, and Employment (MBIE).

SeaCeptor missile tubes on the HMNZS Te Mana. (Image: Thomas Manch/BusinessDesk)Cost versus benefitWhen it comes to frigate fleet size, Professor David Capie, director of the Centre for Strategic Studies (CSS) at Victoria University of Wellington, said typically four vessels were considered a “realistic capability”. “The rule of thumb is you have one in dry dock; one getting ready, fitting up to go on deployment; and one deployed. That three gives you one [spare], and even that's a pretty marginal call, I think. “New Zealand's definitely found that two can leave you with no capability at all for extended periods. ”Given that the Navy’s two offshore patrol vessels were also to be replaced in a similar timeframe, there was an argument for replacing the frigates and these ships with four new frigates, as a “common hull” would simplify the fleet.

The business case would need “very careful weighing”, Capie said. “This is a lot of public money that's going to be spent … Then once that decision is made, you have to try and purchase those ships, slotting into existing order books that shipyards might have. ”Dr Jim Rolfe, a CSS colleague of Capie’s, produced an NZ Institute of Economic Research (NZIER) study of the “value proposition” of a frigate fleet for the Defence Force in 2023. The study sought to weigh the potential cost of frigates against a proposed monetary benefit in various scenarios, including a “benign international environment”, regional trade disruption, trade disruption through conflict in the Arabian Gulf, and major conflict.

The value of a naval combat force in benign times was negligible, according to the modelling, which put dollar figures on benefits such as deterrence, international presence, and fisheries protection.

Each worsening scenario increased the per-annum benefit of a naval combat force to $50 million in a major conflict. “Warships … have a value beyond the actual monetary return, because they’re a cost – really – not a value,” Rolfe said. “The value, amongst other things, is that New Zealand contributes, that New Zealand is seen as contributing, they will act as a deterrent … if neighbours feel as if they’re being heavied by external actors. “Putting a value on them is more difficult. ”