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APPEC: BHP explores LNG, biofuels, collaborates to boost greener shipping

Highlights

LNG not just a transition fuel but vital to reach 2050 target

BHP to launch RFI for steady-state supply of biodiesel into Singapore

Industry collaboration key for rapid energy transition

Global resources company BHP is tapping LNG's and biodiesel's potential as a marine fuel choice to advance sustainable shipping as the maritime industry explores a gamut of fuel options to meet its emissions cuts targets.

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After thousands of years to evolve from wind to coal, and a hundred years to evolve from coal to oil, the shipping industry faces the most rapid transition it has to make.

"There is no better time to be able to take action, given the decarbonization challenge, the existential challenge that we have ahead of us," Rashpal Bhatti, vice president maritime and supply chain excellence, BHP said at the 37th Asia Pacific Petroleum Conference, or APPEC 2021, organized by S&P Global Platts from Sept. 27-29.

BHP will target net zero by 2050 for all shipping of its products, subject to the widespread availability of carbon neutral solutions including low/zero emission technology on board suitable ships and low/zero emission marine fuels, Bhatti said.

Both the International Maritime Organization and the European Union have set shipping emission reduction goals.

"We as an industry, as a public-private partnership have to deliver and allow regulation to work side by side with the changes that we make as an industry. And BHP is taking that approach," Bhatti said.

As part of its decarbonization thrust, BHP recently released its Climate Transition Action Plan that outlines the company's updated approach to reducing GHG emissions and managing climate risks across its global value chain.

BHP is supporting the Global Maritime Forum's Call to Action to fully decarbonize all shipping by 2050 and is a founding member of the Maritime Decarbonization Center in Singapore.

The center will support trials of new fuels and technologies. It will also include facilities for corporate labs, research facilities and house research offices and space for maritime tech start-ups.

Sanguine about LNG, biodiesel

"Many people talk to me about transitionary fuels but how do we know that a fuel is transitionary? I don't think we do [know]," Bhatti said.

According to Bhatti, LNG is not a transitionary fuel and will form part of the heterogenous bunker fuel mix that is going to get the maritime industry to 2050.

"That [LNG] is a fuel that is going to be here for a while because it is the only fuel here today that gives us a 30% reduction in carbon, a NOx and Sox reduction that is significant, is economically viable and the infrastructure is available to make happen what has not happened before, which is to deliver abatement at a cost that is equivalent of or less than the traditional fuel," Bhatti said.

"That is is very important because there is far too much of the market today that is still with the mindset that LNG vessels and LNG fuel together-the total cost of ownership of those means a greater cost outcome than the conventional and traditional method of VLSFO," Bhatti said. "That is not the case."

As far as LNG bunkering was concerned, BHP last year said it had awarded its first LNG supply agreement for five LNG-fueled Newcastlemax bulk carriers, to transport iron ore between Western Australia and China from 2022.

Shell was awarded the contract to fuel the vessels, which BHP will charter from Eastern Pacific Shipping for five-year terms, it said then.

"This contract is expected to form up to 10% of forecasted Asian LNG bunker demand in FY2023," BHP Chief Commercial Officer Vandita Pant, said in a statement then.

"Assuming that the results are positive, we will forge ahead with our strategy of either ordering more LNG-fueled vessels or other fuel types at that time that will allow for more abatement at a lower cost," Bhatti said, adding that these vessels will meet existing EEXI and CII requirements, and optimize voyage operations.

Biodiesel is another "here and now fuel" that is very pertinent because it is a "drop-in" fuel, Bhatti said.

In April, BHP said that it, along with, German shipping company Oldendorff Carriers, advanced biofuels pioneer GoodFuels, and with the support of the Maritime and Port Authority of Singapore conducted the first marine biofuel trial involving an ocean-going vessel bunkered in Singapore on April 4.

As part of the trial, the 2020-built 81,290 Dwt dry bulk carrier Kira Oldendorff was refueled with "drop-in" advanced biofuel blended with conventional fossil fuels.

The technical results of that experiment were excellent in engine usage, maintenance, and the results from the captain and chief engineer were very positive, Bhatti said, noting that an approximate 82% CO2-e well-to-wake reduction was achieved during the trial.

"We're launching an RFI [request for information] in the next 2-3 months for steady-state supply of biodiesel into Singapore," Bhatti said.

First mover advantage, collaboration

"Many of our competitors and other members of the ecosystem have followed suit and ordered LNG vessels and today if you tried to get an LNG vessel slot in one of the shipyards, it is actually very difficult and the pricing has gone up significantly," Bhatti said.

"And that tells you something. It tells you that the first mover advantage has its benefits," Bhatti said.

However, the bold steps required to make this happen need to be very analytical and business proven aspects that go through the organization for a successful transition, Bhatti cautioned.

He also noted that collaboration with various industry stakeholders including traditional and new fuel suppliers, and shipping partners was key to achieve the net zero ambition.

A cross-industry ecosystem was also critical to developing sustainable cost and scale. For a rapid energy transition, "you have to work with the ecosystem and deliver outcomes that haven't been delivered," Bhatti said.