OPINION: Faced with fight or flight, BHP chooses to flee – by Stephen Bartholomeusz (WA Today – August 16, 2021)


The confirmation of speculation of an imminent sale of BHP’s petroleum business to Woodside poses a question. What’s the better course for carbon-intensive businesses, fight or flight?

Rio Tinto opted for flight and the sale of its coal mines in 2018. BHP is in the process of exiting thermal coal, with the sale of its interest in the Cerrejon mine in Colombia in June and its Mt Arthur mine in NSW and its 80 per cent interest in the BMC joint venture with Mitsui in Queensland also on the market.

An exit from petroleum – Woodside disclosed on Monday, after intense recent speculation, that it was in discussion with BHP about a potential merger that would see it acquire BHP Petroleum by issuing Woodside shares to BHP shareholders – and a successful exit from thermal coal would mean that only BHP’s dominant metallurgical coal division would remain from its most carbon-intensive assets.

It isn’t surprising that BHP is considering selling its oil and gas business. Decarbonisation not only causes an increasing cohort of investors to shun companies with big exposures to fossil fuels but, even though demand is likely to expand for at least the next couple of decades, creates a question mark over future investment, growth and value.

Moreover, the big end of the oil and gas sector is capital-intensive and low-margin and, for BHP, where once oil and gas provided a source of cash flows where the prices weren’t correlated to its iron ore, coal and copper businesses in the past decade or so their role as diversifiers hasn’t been quite as significant.

For the rest of this article: https://www.watoday.com.au/business/companies/faced-with-fight-or-flight-bhp-chooses-to-flee-20210816-p58j44.html