World’s No. 1 miner BHP Billiton put its money on oil and gas www.mining.com
World’s No. 1 mining company BHP Billiton (ASX, NYSE:BHP) (LON:BLT) is going all out for its petroleum business, planning to invest as much as $5 billion in that unit as well as mulling potential acquisitions thanks recovering oil prices and the firm’s efforts to lower costs.
Speaking to investors Wednesday, BHP's petroleum president Steve Pastor said a crude shortage is likely to emerge next year, adding that company’s substantial oil business, which includes shale deposits in the US, was well placed to supply the world's ongoing demand for related products.
"While currently well supplied, underlying fundamentals suggest both oil and gas markets are improving more quickly than our minerals commodities," Pastor said.
BHP, which in January this year took a massive $7.2 billion write-down on its US shale unit, said the market has changed substantially since then and that its board is mulling the future of the BP-operated Mad Dog 2 oil and gas project in the Gulf of Mexico. A decision on this, the miner said, will be taken within six months and such operation could enter production by 2022.
BHP is also considering additional investments of as much as $2.5 billion in existing project options.
The reason behind these moves, Pastor noted, is that population growth and rising incomes are expected to boost oil demand to more than 100,000 barrels of liquids per day by 2025. And a third of that, he said, will need to come from new sources, which means there’s a significant opportunity to make investments in growth.
The company said unit cash costs in its conventional petroleum business are expected to be around $10 per barrel of oil equivalent over the next two years, giving it some of the best returns in the industry. It also said its shale assets are generating cash at current prices.
Published Date:2016-10-06