BHP is examining options for its oil and
gas assets including a sale, as the miner
looks to focus on commodities that will
be needed in the shift to a low-carbon
economy, according to people familiar
with the matter.
The decision to review the future of the
petroleum business comes as big miners
face pressure to reduce their exposure
to fossil fuels and align with the goals of
the Paris climate agreement.
BHP’s petroleum unit sets the company
apart from its mining peers. But
ageing fields and the sale of its lossmaking
US shale business in 2018 have led to
a sharp fall in production from 235m
barrels in 2013 to around 103m in the
year to June, or 280,000 barrels per day.
While BHP has options to increase
output at the Scarborough gasfield off
Australia as well as in the Gulf of Mexico
and Trinidad and Tobago, that would
require investment.
Mike Henry, BHP chief executive, has
spoken positively of the outlook for oil
and gas, arguing that the medium-term
outlook for prices is attractive because
of a lack of investment in the industry.
But with investors increasingly focused
on environmental, social and governance
issues, Tyler Broda, an analyst at
RBC Capital Markets, said he could see
why BHP might contemplate an exit. “A
potential sale is consistent
with . . . Mike Henry’s previous commentary
about expectations for an oil
price recovery to open up options for the
group’s petroleum business,” he said.
Dominic O’Kane, analyst at JPMorgan,
said a petroleum exit could be a “power ful corporate catalyst” that would
“enhance” BHP’s ESG credentials. “We
believe an exit would likely ringfence
BHP’s exceptional cash flows for nonfossil
fuel organic growth, mergers and
acquisitions and generous shareholder
distributions since BHP could avoid a
major new capital investment phase this
decade in petroleum,” he said.
In the six months to December, the
petroleum business generated revenue
of almost $1.6bn. Analysts at Bernstein
Research said the unit could be worth
$13bn. BHP declined to comment.
Since taking the helm in 2000, Henry
has spoken of increasing the company’s
options in “future-facing” commodities
including copper and nickel. But large,
high-grade deposits are becoming more
difficult to find and most of the world’s
big miners are also looking for opportunities
in those commodities.
BHP already sees potash, a key crop
nutrient, as a long-term replacement for
oil and gas and another leg to its business
alongside iron ore, copper and coking
coal. The company is expected to
approve the $5.7bn first stage of Jansen,
a giant Canadian potash project, when it
reports annual results next month