BHP’s still pumped about petroleum

BHP still sees a long-term future in its petroleum division despite rising resource nationalism and the company’s climate change promises.

Hydrocarbon separators at BHP’s Black Hawk central production facility in the Eagle Ford Shale.

BHP still sees a long-term future in its petroleum division despite rising resource nationalism and the company’s climate change promises.

However, despite the global resources giant confirming it is in oil and gas for the long term, analysts suggest the company could still offload its Bass Strait and North West Shelf interests.

Speaking in London overnight on Wednesday, BHP Petroleum boss Geraldine Slattery said that despite persistent speculation BHP could exit the business — stemming largely from pressure from activist shareholder Elliott Management in 2017 — petroleum remained an “integral part of the portfolio” and a key growth option for the resources giant.

“We believe in the demand trajectory, particularly for oil, and also for gas, and we think we have got the capabilities to generate returns from that,” she said in a company question and answer session.

“We are less exposed to end market disruptions in any one market and that shows up for us, particularly across our oil and gas portfolio, as it does tend to operate somewhat countercyclically with the other commodities.”

Ms Slattery said BHP’s Trion acreage, off Mexico, remained a key growth option for the resource major despite noises from Mexico’s left-leaning president, Andres Manuel Lopez, hinting at the reversal of the previous regime’s decision to open up offshore acreage to foreign investors.

BHP’s success in winning the right to explore Trion — where the company has hit hydrocarbons in each of the four exploration holes drilled, a rare success rate — was hailed this week by external affairs boss Geoff Healy as a sign the company’s approach to working with stakeholders was a success.

Ms Slattery said BHP’s experience of working with the Mexican government was positive “despite the change in rhetoric and administration”.

“We have been very reassured with the continued support for the sanctity of contracts in Mexico,” she said.

“We see that the objectives of the administration are very tied to our own in terms of exploiting the resource for the benefit of not just the Mexican economy, but supporting improvements socially, and that is very much tied to how we like to operate as a company, and so we are advancing our plans there. We do continue to look at growth opportunities and we are quite optimistic actually that Mexico will play out over the long term.”

Whether the company retains its historic projects in Australia remains in doubt, however, with Bank of America Merril Lynch analysts the latest to suggest BHP could look for an exit from its Bass Strait and North West Shelf interests.

Speculation around BHP’s future in Bass Strait was sparked by Exxon’s September move to put its half-share in the jointly held projects on the market, and BAML analyst James Redfern suggested in a client note on Thursday its exit could prompt a similar move by BHP.

With ACCC intervention seen as a likely barrier to the sale of the Bass Strait projects — which supply 15 per cent of the east coast gas market — to another oil and gas major, Mr Redfern said they would be less attractive to BHP, putting a $US1.8bn ($2.7bn) price tag on the assets.

BHP’s 16.7 per cent stake in the Woodside Energy-operated North West Shelf gas project could go the same way.