BHP hopes to leave fossil fuels behind it as it sells off oil & gas unit

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Anglo-Australian miner BHP is set to divest its main oil & gas unit to Australia's Woodside in a merger set to pave the way for the company to shift away from oil and gas.

An announcement made on August 17 revealed BHP shareholders would own 48% of the resulting company amid soaring profits as the world comes out of the coronavirus pandemic. Cutting petrol loose may have been a no-brainer for the company, as the sector only accounts for around 5% of its profits.

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The group's CEO Mike Henry has revealed BHP will be shifting its interests within the industry to focus on metals such as copper and nickel, as well advances in green mining. The merger with Woodside should allow BHP to form a top 10 independent oil and gas company worth roughly $38 billion (€32 billion).

This will also lead to the company shifting its primary stock listing to Australia.

Part of the announcement revealed the miner will be unifying its dual-listed structure and recorded a record final dividend of around $10.1 billion (€8.58 billion).

The company's board also revealed plans to develop the $5.7 billion (€4.13 billion) Jensen potash project in Canada, which should also provide an avenue for future growth with the potential of offset some of the losses from fossil fuels, which make up 12% of its revenue.

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BHP is currently the largest mining company in the world based on market value. Its merger with Woodside doubles the Australian energy company's output

Henry claims the new avenues the company are essential to aid in industry decarbonisation, such as the greater push for electrification - both in the mining industry as well as in transport - and for the construction of renewable infrastructure. Whether this stays true or becomes an example of corporate greenwashing remains to be seen.

“We are actively positioning BHP to meet the world’s needs and to continue to sustainably generate value for our shareholders, employees, and business partners, as well as for our host communities and governments," he said.

He added this would leave the company in a stronger position, "more efficient and agile” and with a "portfolio that caters to market mega-trends".

This may also mean the company could start shifting away from iron ore, something other major miners, such as Rio Tinto, are also looking to do owing to it being particularly carbon-intensive.

Read more: Australian coal region emits methane equivalent of 30m cars

Last year, the company also promised to sell off its remaining coal mines by 2022, signalling the potential to steel itself for a low-carbon future as it looks to continue making advances in sustainable mining.

The company's continued investment in coal until this point has been met with fierce opposition from climate activists.

Mining companies worldwide, and heavy industry in general, are facing mounting pressure to divest fossil fuel and carbon-intensive mining procedures before the goals set out by the Paris Climate Agreement become impossible to meet.

Existing oil and gas infrastructure may be the key to decarbonisation as some renewable companies claim renewable sources such as green hydrogen could be transported using existing pipelines.

However, Henry revealed coal and iron may not be entirely out of the equation for the short term, suggesting the two will be necessary "to produce the steel for infrastructure, including that required for decarbonisation, and the potash required for sustainable global food production".

Read more: Steeling the future: Using hydrogen to make green steel

The merger with Woodside is expected to be finalised during the second quarter of 2022.

Both companies revealed it could generate net savings of around $400 million annually.

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