British Australian mining company BHP has signed a five-year contract with Shell to supply bunker liquefied natural gas (LNG) to fuel five of its ships that transport iron ore from Western Australia to China.
The contract is BHP's first such LNG supply agreement. The company's pivot towards LNG is part of a plan to reduce carbon emissions and comply with the International Maritime Organization's 0.5% sulfur limit for marine fuels, which came into effect on January 1 this year.
The company expects its LNG supply contract to "generate up to 10% of projected bunker LNG demand in Asia," BHP Chief Commercial Officer Vandita Pant said without providing further details.
The supply agreement with Shell was concluded three months after BHP entered into a five-year freight contract with Eastern Pacific Shipping for five Newcastlemax LNG-powered bulk carriers to transport iron ore from Western Australia to China.
BHP believes the deal will help meet its "2030 target of 40% reduction in emissions intensity."
The company also expects a 30% reduction in carbon emissions for every LNG flight between Australia and China compared to a regular fuel flight.