Australian mining giant targets US shale gas expansion

Aug. 12, 2013

In a bid to capitalize on growing global demand for commodities, the world’s largest miner plans an expansion of its U.S. shale oil and gas operations.

Andrew Mackenzie, the chief executive of Australian mining giant BHP Billiton, expects global demand for commodities to rise by 75% in the 15 years ahead. In a bid to capitalize on that demand, the world's largest miner plans an expansion of its U.S. shale oil and gas operations.

Mackenzie signaled this intention in an interview for Bloomberg, telling the news agency that he wanted to make BHP "hugely proficient," possibly even a leading player in the shale resources space. This means that the company will be in a position to consider opportunities elsewhere with great precision and interest, Mackenzie added.

BHP and rivals such as Exxon Mobil and China Petrochemical have been looking to make the most of soaring energy demand through investing in U.S. shale assets. In 2011 BHP parted with $20 billion for that purpose, Bloomberg said.

Mackenzie took charge of the company in May, succeeding Marius Kloppers to the post. As the CEO told Bloomberg, China — already the top consumer of metals and energy — will remain the key driver of commodities demand alongside rising urbanization levels as 250 million people pour into cities. Chinese economic reforms are being pushed through by Premier Li Keqiang, who is striving to maintain growth without letting financial risks and local government debt get out of control. The Chinese government is implementing targeted measures designed to support the economy by enhancing infrastructure, reducing taxes and helping small businesses. Mackenzie told Bloomberg that he was generally optimistic about China. He noted that its policy makers were successfully rebalancing the economy, pushing it towards a consumption-based model. But this is being done alongside greater consideration of how the country can more efficiently use the resources it buys, Mackenzie said. In April, BHP's finance chief Graham Kerr projected a moderation in Chinese economic growth, putting the annual pace of expansion in the next two years at about 6%. This compares to growth of 7.9% in 2012, which was the slowest year since 2008. BHP counts on China for 30% of its sales, Bloomberg added.

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Thanks to Asian energy demand, some $180 billion worth of liquefied natural gas (LNG) projects are being developed in Australia. BHP's home country is expected to overtake Qatar and become the top global LNG exporter by 2020. Mackenzie said that his company had yet to invest in U.S. export terminals, currently limiting its activities there to gas production. However, he expects U.S., Canadian and African LNG suppliers to become serious rivals to Australian players when it comes to snatching business in Asia.

Bloomberg went on to add that the U.S. Energy Department was currently assessing 20 applications for LNG export terminals. The country has experienced a boom in hydraulic fracturing (fracking) and this has resulted in a massive boost to U.S. gas supply. The large-scale extraction of gas from shale rock formations propelled the U.S. to the top in 2009, when it replaced Russia as the biggest producer of the fuel worldwide.

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