By Peter Milne
For a man who wanted to frack Western Australia’s Kimberley for gas a few years ago, Andrew Forrest does not lack in ambition to tackle climate change.
The self-confessed big carbon emitter, via his iron ore miner Fortescue, has not only performed a high-profile climate U-turn, but accelerated along the green path ever since.
Fortescue chair Andrew Forrest has set increasingly ambitious targets for his mining company.Credit: Jason Alden
Two years ago, he committed his diesel and gas-fired miner to net-zero emissions by 2040, 10 years ahead of his rivals. That was not enough, and nine months later he brought the target forward to 2030, more than halving the time his team has to deliver.
Then, not content with creating an emissions-free miner, a year ago Forrest added to his to-do list an aim for Fortescue’s customers - mainly hugely polluting Chinese steel mills - to have no net emissions by 2040.
To help, Fortescue wants to use renewable energy-powered machinery called electrolysers to separate hydrogen from water so this so-called green hydrogen could displace coal in the steel furnaces of Asia.
Again, Forrest’s ambitions are huge, wanting to produce 15 million tonnes of green hydrogen a year by 2030. That target is 26,000 times larger than the biggest green hydrogen facility under way in Australia.
Forrest’s globe-trotting to secure sites to make the clean fuel has caught the headlines but last week his mission was to prove his original pledge to eliminate emissions from his Pilbara mines would make his fellow shareholders money, not cost them.
After name-dropping the US president and the UN secretary-general, Forrest’s pitch from New York to Australian investment analysts was a “fully costed” plan to eliminate what otherwise by 2030 would be 3 million tonnes a year of carbon pollution from Fortescue’s mining.
“We have the road map, the technology, timetable, strategy and costings required to decarbonise fully,” and do it profitably, he said.
“This is the key… which the secretary-general said will make this a turning point in history.”
To bend history Fortescue plans to spend $US6.2 billion ($9.6 billion). It needs two to three gigawatts of wind and solar power, so potentially more than Australia’s largest power station Eraring. Batteries, transmission lines, and electric-powered trucks add to the bill.
An “Infinity Train” will charge its batteries on the downhill run to port and have enough power left to haul the empty ore cars back to the mines.
By 2030, the miner expects to save $US3 billion ($4.7 billion) a year by not buying gas and diesel.
Shaw and Partners analyst Peter O’Connor’s verdict was that Fortescue’s decarbonisation was a noble ambition, but he wanted “more details than Kool-Aid”.
When asked how the renewable energy required was now half that envisaged for an earlier plan based at nearby cattle stations he owned, Forrest’s reply was succinct, if not detailed.
“It’s batteries, baby,” he said.
And how could the plan be fully costed when the engineering design still had an enormous range in how much solar and wind power is required?
“That’s the technology we have now… we’re going to keep on optimising this… driving the savings up and the capital cost down,” he said.
Forrest does not hold back about those who think Fortescue may have bitten off more than it can chew.
“I know you won’t print it, but it’s only the f---wits who would like it not to happen, who might have a paddle in the lake of fossil fuel, or who are getting left behind,” he said.
When the proposition is put to Forrest that many in industry share his climate concerns and want him to succeed but have some doubts that Fortescue can pull it off, he defends his company’s capability.
“Look, we’re finishing a fairly large, very complex project called Iron Bridge successfully,” he said.
Defining Iron Bridge as a success is a testament to Forrest’s salesmanship and optimism.
It was to cost $US2.6 billion ($4 billion) and start production earlier this year. After three reassessments, Iron Bridge will be a year late and cost as much as $US3.8 billion ($5.8 billion).
The first cost bump resulted in the exit from Fortescue of well-respected chief operating officer Greg Lilleyman and two senior project managers.
Iron Bridge was Fortescue’s first step away from digging up ore and railing it to port, with the magnetite ore requiring complex processing to produce a marketable product before being piped 135 kilometres to the coast as a slurry.
While many aspects of the magnetite project were new to Fortescue, it needs a much bigger capability leap to rid itself of fossil fuels.
“Our [Iron Bridge] team is staying… going from mines straight to decarbonisation,” he said.
“We’re locked and loaded.”
Fortescue’s new clean energy arm, Fortescue Future Industries, also has plenty of technical firepower, growing to 1200 employees in two years.
While Forrest clearly has an optimism bias, he should be wary of making it compulsory.
ExxonMobil studied why projects it was involved in over 20 years, including the Gorgon LNG project in WA, exceeded their budgets by $US138 billion ($215 billion).
The oil and gas giant’s confidential study reported by Bloomberg reached two conclusions: the enormous complexity of the projects and “human biases” leading to “over-optimistic plans” that would be approved for funding.
Canadian engineer Christopher Haubrich studied more than 300 mining projects and concluded that cost overruns were so common because the pressure to start construction outweighed the need to get the costs right.
“Once management decides they believe a project is viable, it is hard to change their minds,” Haubrich concluded in his 2014 paper.
Fortescue expects fossil fuel prices, and hence its huge diesel and gas bill, to keep rising.
“This is an environment where your highest risk is to do nothing,” Forrest said.
Perhaps the second-highest risk is a lack of caution, trying too much too soon, and not pulling it off.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.