BHP’s extraordinary call on power policy

BHP chief executive Andrew Mackenzie addresses the Melbourne Mining Club earlier this month. Pic: Stuart McEvoy

BHP Billiton is the world’s biggest miner. But it might just be worst candidate among Minerals Council of Australia members to steer the debate on east coast energy policy on behalf of the minerals industry.

This is because BHP is unique among major MCA members in being a net beneficiary of higher east coast energy prices and lower domestic coal demand, thanks to its 50 per cent share in the big gas fields of Bass Strait.

BHP’s east coast mining operations have an average electricity load (demand) of 309MW per annum (or about 1 per cent of National Energy Market demand), according to the big miner’s submission to the Finkel Review.

This would take about 20 petajoules of gas to provide in a gas-fired power station.

That volume pales next to the 165 petajoules of gas, or more than 10 per cent of the east coast domestic market’s gas needs, that is BHP’s share of Bass Strait gas production.

Yesterday, BHP publicly called on the Minerals Council, whose combined membership is responsible for 15 per cent of east coast power use, to stop calling for energy cost and reliability to be prioritised over emissions reduction.

It is an extraordinary call.

The two other big MCA members — Rio Tinto and Glencore — are both big net east coast power users who have warned plants could close if energy costs continue to rise.

And while it can be argued the MCA’s lobbying for new coal-fired power plants — which BHP also demanded it stop — has been on the extreme side of the debate, the call for a focus on energy cost and reliability is not.

It is in step with other big power-using groups, including Manufacturing Australia, and it is also the line federal Energy Minister Josh Frydenberg is taking.

It was also the tone of Rio’s Finkel submission and Glencore’s public statements.

Last month, in an information session before the company’s Melbourne AGM, BHP chief Andrew Mackenzie alluded to BHP’s positive exposure to rising power prices when asked if they would have an impact on Australian operations.

“We’re both sides of the equation because we sell a lot of energy into power markets,” Mr Mackenzie said.

“If there is greater demand for that that is ultimately bidding up the price that people will pay for energy, we will benefit from some of it through making more profits in our energy business.”

BHP’s climate arguments are well-considered and there is no doubt about its desire for lower cost and more reliable power, given the impact of recent South Australian blackouts on its Olympic Dam copper and uranium mine and plant in South Australia.

But it is not a great look for BHP to try to drive the energy-intensive minerals industry’s position on east coast energy policy, when it is the only sizeable Australian miner that benefits from rising east coast energy prices.