BHP's CEO Sees U.S. Shale Expansion as Mineral Demand Grows
Comment of the Day

August 07 2013

Commentary by Eoin Treacy

BHP's CEO Sees U.S. Shale Expansion as Mineral Demand Grows

This article by Elisabeth Behrmann for Bloomberg may be of interest to subscribers. Here is a section
Asian energy demand, including from China, is helping drive the development of about $180 billion of liquefied natural gas projects in Australia, BHP's home country. The nation is forecast to surpass Qatar as the world's largest exporter of LNG by the end of the decade.

“We're not yet investing in export terminals in the U.S., we're simply producing the gas,” Mackenzie said. “But I do believe that Australian LNG will face stiff competition from U.S., Canada and Africa to supply the next tranche of LNG into Asia.”

The U.S. Energy Department is weighing 20 applications for LNG export terminals. Hydraulic fracturing of shale rock formations from Texas to West Virginia has boosted supplies of gas in the U.S., helping the nation overtake Russia as the world's biggest producer of the fuel in 2009.BHP, due to report earnings on Aug. 20, expects annual economic growth in China to moderate toward 6 percent over the next two years, Chief Financial Officer Graham Kerr said in April. China, whose economy grew 7.9 percent last year, the slowest since 2008, accounts for 30 percent of BHP's sales.

Eoin Treacy's view One of the great challenges for any mining operation is how to replace reserves at attractive prices. For a global miner such as BHP Billiton, the challenge is to deploy cash effectively to ensure not only reserve life but diversification so that the company is not overly impacted by moves in an individual commodity.

While iron-ore is still the company's largest segment, petroleum represented 17.98% of revenue in 2010 while energy coal represented 8.37%. The diminishing influence of oligarchies in iron-ore and more recently potash is reflective of the new supply coming on line after a decade of investment in the commodity complex. This has weighed on industrial resource prices and therefore miners.

BHP Billiton rebounded from the lower side of its 2-year range over the last month and has at least paused in the region of the 200-day MA. It will need to find support above 1700p if the benefit of the doubt it to be given to higher to lateral ranging.

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