BHP to reap rewards of expansion
Sydney Morning Herald
Thursday October 22, 2009
BHP BILLITON has yet to reap the benefits of its multibillion-dollar investment in expanding its iron ore business. But similar heavy investment in expanding oil production in the Gulf of Mexico worked a treat in the September quarter.The production report for the quarter, released yesterday, showed iron ore production was 30.1 million tonnes. That was a record, but it was a modest 1 per cent improvement on the previous corresponding period.But iron ore output is about to take off, thanks to the additional 26 million tonnes of annual production to come from the group's RGP4 expansion in the Pilbara, and an additional 50 million tonnes a year to come from the RGP5 expansion, due for completion in the second half of 2011.BHP's 85 per cent share of those expansions is costing $US6.65 billion ($7.17 billion). Unlike the delayed impact in iron ore, the group's petroleum division is already reaping the benefits of massive investment in Gulf of Mexico projects, notably Atlantis and Shenzi. The two projects underpinned a 30 per cent surge in BHP's oil production to 24.67 million barrels and an 18 per cent surge in total petroleum products (after giving gas production an oil value) to 41.21 million barrels of oil equivalent.The 100,000 barrels-a-day Shenzi project has been producing oil at levels well above its nameplate capacity but the 200,000 barrels-a-day capacity of Atlantis is a long way off after more than a year in production.Atlantis's output averaged only 114,000 barrels a day in the September quarter but a program of water injection wells and new wells in the northern part of the field are expected to see the 200,000 barrel-a-day rate reached some time in the next 12 to 18 months.Commentary from BHP on the outlook for commodities in the quarterly report warned that China's restocking of commodities was essentially complete and "there is now evidence of higher-than-normal stockpiles across the supply chain"."We continue to look for Chinese imports to more closely reflect real demand over the remainder of the 2009 calendar year," BHP said.It was also cautious on the potential for increased demand in the developed economies which, unlike China, continued to hold low inventories. But it did note that there are signs of restocking, particularly in steelmaking raw materials, after a period where "demand essentially disappeared".Elsewhere, the production report contained the usual bag of mixed results, although this time around there were some lingering scars from the group's decision to rein in production of some commodities when the global financial crisis was at its worst.Most notable in that category was manganese, which was down 69 per cent on the previous corresponding period.
© 2009 Sydney Morning Herald
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