Shale will revive America, BHP says
BHP Billiton Ltd. says the shale boom in the United States will spur an industrial revival and transform the world’s largest economy.
“There are always opportunities for exports in the U.S. and Canada, but I think there’s a push and a growth of re-industrialization in the U.S. that will consume a lot of the energy in that country and give them a great opportunity to grow going forward, and we’re well positioned for that,” BHP chief financial officer Graham Kerr said this week at the Bloomberg Australia Economic Summit.
In contrast, in Melbournebased BHP’s homeland, companies from Chevron Corp. to ConocoPhillips are investing almost $200 billion on plants to export liquefied natural gas to Asia. Under outgoing CEO Marius Kloppers, BHP spent $20 billion in 2011 buying shale assets in the U.S. to tap a projected increase in demand for energy.
“The energy division is very important to BHP and perhaps it didn’t receive much investment in the previous years so they needed to underpin the growth story there,” said Tom Price, a Sydney-based analyst at UBSAG. “They seem to have positioned themselves well.”
U.S. crude-oil output in the fourth quarter this year will exceed imports for the first time since 1995, as fields in North Dakota and Texas put the country on track to surpass a production record set a quarter-century ago, the U.S. Energy Information Administration said last month.
The U.S. will surpass Saudi Arabia in oil production in the next decade, making the world’s biggest user almost self-reliant, the International Energy Agency said last year.
“Traditionally they have been short energy” in the U.S., Kerr said. Now the shale opportunity is “hard not to be excited about. It’s transformational,” he said.
The U.S. shale-gas revolution, which has revitalized chemicals companies and prompted talk of domestic energy self-sufficiency, is attracting a wave of investment that may revive profits in the steel industry.
Austrian steelmaker Voestalpine AG last month chose Texas as the site for a new $720-million factory to benefit from cheap gas, while Nucor Corp., the most valuable U.S. steelmaker, plans to start up a $750-million Louisiana project in mid-2013.
BHP plans to focus on higher-priced liquids in the Eagle Ford region of Texas after buying Petrohawk Energy Corp. for $15.1 billion, including debt, Kerr said. BHP, which also purchased assets from Chesapeake Energy Corp. for $4.75 billion, is spending $4 billion this fiscal year on shale.
“Today, the majority of our drill rigs and our operations are focused toward building out and developing our liquids-based business in shale in the Eagle Ford,” Kerr said. “That continues to be the path that we go down because that’s where we see the highest returns.”