Maritime trade, the backbone of the global economy, grew between 1990 and 2020, with maritime transport accounting for 75 percent of global freight. More than 80 percent of globally transported goods were delivered by ships, which accounted for only one-fifth of the energy used, in comparison with other modes of transportation. But this efficiency came at a huge cost to the environment. To power maritime trade, demand for energy-dense, inexpensive, highly pollutive fossil fuels had grown. To reduce carbon emissions, many in the maritime ecosystem, including Australian mining company, BHP, explored the use of alternative fuels, reports SMU.
Pollutive conventional fuels to alternative fuels
BHP had also diversified into ship chartering, wanted to reduce emissions from its chartering business by transitioning from pollutive conventional fuels to alternative fuels. Mr Rashpal Bhatti (Bhatti), Vice President of BHP’s Maritime and Supply Chain Excellence (MSCE) arm, worked to achieve this mission. He knew that such a transition would involve a wide group of stakeholders in the maritime industry — vessel owners, regulatory authorities, ship charterers and fuel suppliers. They needed to be convinced of the merits of using alternative fuels.
First, Mr Bhatti secured buy-in from his colleagues and team. Then, the team measured ship emissions, and would not charter ships that had poor emission ratings. Next, their research found that Liquified Natural Gas (LNG) produced 30 percent emission abatements and was the most feasible. Finally, BHP ran tenders for LNG-fuelled ships and LNG bunker fuel supply. As a result of the tender, BHP placed an order for five LNG-fuelled Newcastlemax bulk carriers from Eastern Pacific Shipping (EPS) for five years. This would translate into reduced overall GHG emissions in BHP’s value chain.
Thanks to their painstaking efforts, in February 2022, Mt. Tourmaline – the first of the five bulk carriers and the world’s first LNG-fuelled Newcastlemax bulk carrier used to transport iron ore between Western Australia and Asia – was delivered to Singapore’s Jurong Port for its first LNG bunkering.
The case, “Riding the Decarbonisation Wave: BHP and its LNG-Fuelled Vessels” is written by Lee Kong Chian Professor of Operations Management Shantanu Bhattacharya of the Lee Kong Chian School of Business, Dr Flocy Joseph, Senior Deputy Director, Head of Commercial, Executive Development and Case Writer Mahima Rao-Kachroo at the Centre for Management Practice from Singapore Management University. To read it in full, please visit the CMP website by clicking here.
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Source: SMU
