BHP Billiton To Expand US Shale Gas Operations

Michael Teague  |

The Australian mining behemoth BHP Billiton Ltd. (BHP) is the largest publicly traded company in the industry, producing coal, aluminum, nickel, copper, manganese, potash, and iron ore from mines throughout six of the globe’s continents.

Nearly three weeks ago, the $168 billion market-cap firm released a production report for its recently-ended fiscal fourth quarter, and the numbers were indeed impressive. Business across most segments was moving along at a brisk pace with a significant increase in copper production, and a 13th consecutive record-breaking year for iron ore output. And while petroleum output came in shy of forecasts, this was mostly due to production delays in the Gulf of Mexico rather than execution, and was offset by a 17 percent increase in its US shale oil and gas drilling operations.

Late on Tuesday, CEO Andrew Mackenzie said in an interview that based on the Melbourne-headquartered company’s expectations for a 75 percent increase in global commodity demand over the next 15 years, BHP would be expanding its operations in US shale oil and gas. Prior to Mackenzie’s arrival at the helm of the company this past May, $20 billion had already been invested in US shale energy.

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And BHP certainly seems prepared for such a gambit; the $180 billion it has already spent on natural gas projects in its home country will play a significant role in Australia surpassing Qatar as the world’s largest exporter of liquefied natural gas (LNG) by the end of the decade, no small feat.

While the planned US expansion will seek to tap into the nascent American energy boom before the field become too competitive, however, BHP is ultimately seeking to capitalize on economic expansion closer to home. Despite the recent trend of slower economic growth out of China that has made the rounds of the financial media of late, Mackenzie believes that the world’s most populous nation, and its largest consumer of resources, will continue to fuel demand for commodities as urbanization is expected to push 250 million citizens into cities.

Furthermore, this optimism is based on numbers that assume a slow-down from last year’s 7.9 percent growth to 6 percent over the next two years. China presently accounts for some 30 percent of BHP’s sales, and has been one of the main drivers of the company’s expansion of domestic LNG production.

The news had little effect on shares, as BHP’s stock edged up a slight 0.14 percent to $63.37 in mid-Wednesday trading. The company reports earnings on August 20, which should give a better idea of how well-positioned it is to invest more money and effort into US shale. For the time being, BHP has not yet invested in its own US export terminal and only produces American LNG, a situation that could definitely change.

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