BHP Billiton boss Andrew Mackenzie believes gas will one day overtake iron ore as the mining giant’s biggest earner.
But for now the world’s biggest mining company is concentrating on expanding its potash portfolio in Canada to cash in on the world’s need for food.
While China’s demand for steel has made West Australian iron ore the biggest contributor to BHP, Mr Mackenzie sees a point in the future when gas will make up a larger part of the business.
“Yeah, of course I can see a point,” Mr Mackenzie said after BHP’s annual general meeting (AGM) in Perth this week.
“It depends on China, it depends on the choices that the world makes in terms of energy, it depends on the competitiveness of Australian gas versus gas elsewhere.”
The AGM was peppered with questions about how the company, which is focused on its “four pillars” of iron ore, petroleum, copper and coal, is positioning itself for a future affected by climate change and reduced carbon emissions.
“We’re having to think quite quickly about how we adapt our portfolio in light of many of the issues that were raised at this AGM,” Mr Mackenzie said.
But he added that there was flexibility in the portfolio to adapt quickly.
BHP makes most of its money from its iron ore, petroleum and copper divisions.
Iron ore delivered revenues of more than $20 billion in 2012/13 compared to $13 billion from the petroleum and potash division.
It comes as global oil and gas companies look to capitalise on an expected lift in gas demand from China and Japan.
BHP and joint venture partner ExxonMobil recently received federal environmental approval to build the world’s largest floating liquefied natural gas (FLNG) operation in the remote Scarborough gas field 220km offshore in north Western Australia.
But Mr Mackenzie is tight lipped about the project’s progress, referring questions to the operator ExxonMobil.
Exxon says a decision to pursue a floating option will be made by the end of the year and it hopes to start production in 2020/21.
While eying WA’s large offshore gas fields, BHP is also interested in unconventional onshore gas following its shale expansion in the US.
At the opening of the new Macedon gas plant near Onslow in September the head of BHP’s conventional gas business Steve Pastor said BHP was eager to learn more about the Canning Basin and talk with WA Premier Colin Barnett about “opportunities to enter into that”.
A recent HSBC report showed Australia has the seventh largest shale gas reserves in the world.
The remote onshore Canning Basin has received attention from major oil and gas players, including Mitsubishi and ConocoPhillips.
Still, Mr Mackenzie has made it clear that for the foreseeable future his company will be investing heavily in potash, which is used as a crop nutrient.
BHP’s $US2.6 billion spend on the Jansen potash project in Saskatchewan will cost about $US12 billion to get into production.
On its own Jansen would not be a big enough business to rival the four main BHP businesses, but good exploration results on nearby acquired land would enable the company to exploit a large area in the future, Mr Mackenzie said.
“For the long-term we’re thinking about possibilities in potash, copper is still a very interesting metal to invest in and our portfolio between strong minerals and strong oil and gas is something we’d like to maintain.”
Potash is viewed as a consumption commodity for the future as the world’s population and incomes grow.
