BHP Exits Offshore Oil and Gas to Focus on "Future Facing Commodities"

BHP's Shenzi platform in the U.S. Gulf of Mexico (BHP)

Published Aug 17, 2021 10:54 PM by The Maritime Executive

Australian oil and gas company Woodside Energy is planning to buy mining giant BHP's petroleum business in an all-stock deal, creating a new top-10 independent energy firm. BHP will effectively exit oil and gas, but its shareholders will receive a 48 percent stake in the combined firm, which will continue as Woodside. 

BHP is divesting a portfolio of extensive offshore oil and gas assets, including the Shenzi, Atlantis and Mad Dog fields in the U.S. Gulf of Mexico. Off Australia, its interests include the North West Shelf gas project, the Pyrenees development area, the Macedon gas field and a number of legacy developments in the Bass Strait area. According to the Wall Street Journal, the business unit was valued at about $15 billion - just under Woodside's market value. 

Woodside currently operates the Ngujima-Yin FPSO and the Okha FPSO off Western Australia, and it is a partner the North West Shelf project, which delivers a third of Australia's oil and gas production. It has several new developments in the pipeline, including the Scarborough gas prospect off Western Australia and the Sangomar field off Senegal. 

In a statement, BHP said that it was divesting its oil and gas production assets in order to increase its exposure to "future facing commodities" like copper and nickel, which are needed to make electronics, electric motors and batteries. At the same time as the news of the oil unit sale, BHP showed its new priorities by announcing a $5.7 billion investment in a new potash fertilizer mine in Canada.

"[The merger] frees up more capital within the remaining BHP to deploy into those commodities that are most positively leveraged to the future and the big megatrends that are under way around us, including decarbonization, electrification, population growth and rising living standards," said BHP CEO Mike Henry, speaking on CNBC. "All of those things are going to drive demand for copper, nickel and potash . . . and even steel, which [means] demand for iron ore and higher-quality coking coal."

The news of BHP's exit from oil comes as the firm posts its most profitable fiscal year ever, with EBITDA totaling $37 billion. The company has also released plans to fold the company's UK-incorporated arm into its Australian parent company, exiting the London FTSE 100 stock index and consolidating its corporate structure.