BHP aims for more copper, oil; steers away from EV minerals

LONDON, Nov 2 (Reuters) – The world's biggest miner BHP's response to the electric vehicle debate is to hunt for new reserves of copper and oil, while seeking a buyer for its assets to produce battery-grade nickel and steering clear of lithium and cobalt.

Arnoud Balhuizen, chief commercial officer at BHP, has said 2017 marks a "tipping point" for electric vehicles in that they have entered the mainstream of metals demand forecasting.

In terms of sales, however, the mass move is further off as hybrids and conventional cars stay on the roads for a transition period.

Balhuizen estimates that shift would be around 2030, which is also when BHP expects demand for oil from light vehicles to peak. Other forms of oil demand, including from industry and heavy goods transport, are likely to be more sustained.

So far, for BHP, the one real change linked purely to electric vehicles is BHP's decision to invest in its Nickel West operations in Australia to produce nickel sulphates required by battery-makers.

The assets, however, are for sale.

"If we get the right price, we would sell it," Balhuizen said in an interview. "We're not actively in discussion, but it remains non-core."

As a huge company whose strength lies in producing big volumes of bulk commodities, battery minerals, such as nickel, as well as lithium and cobalt, are not a priority.

Also, BHP has enough coking coal and iron ore, used for steel-making, leaving copper and oil as the two resources for which it is exploring. Copper is used in the vehicles' batteries and motors.

"The two commodities where we want to extend our resource base are basically oil and copper. We are running exploration programmes for both," Balhuizen said.

Investment decisions

In evaluating a commodity, size for BHP is a prime consideration as it can generate economies of scale and keep costs low. Copper is one bulk commodity whose use could surge depending on demand from electric vehicles and renewables.

From 2018, additional smelters planned in China would start to require an extra 400,000 tonnes per year of copper concentrate and Balhuizen said he received regular inquiries from customers in China and elsewhere for more copper.

For oil, he saw a continued rise in demand of around 1 million barrels per day over the next 10-to-15 years, which is conservative compared with the International Energy Agency's current forecasts.

BHP has also said it is selling its shale assets, which it says has long been the plan, although the company's announcements follow pressure from activist investor Elliott Advisors.

Selling out of shale, however, is mostly about gas, Balhuizen said, a fuel for which supply is so abundant it is difficult to generate profits.

To find new oil, BHP is exploring in the Gulf of Mexico and has taken advantage of cheap rig rates.

"We are investing counter-cyclical to find more oil," Balhuizen said.

Part of his role is to establish BHP as one of the most accurate forecasters to ensure such investment decisions are well-founded.

Beginning in May last year, he took on an expanded role combining procurement with sales, which allows BHP to draw information from the equipment it buys to understand how much copper an engine or an air conditioning unit requires.

"It's not only about buying better and selling better, it's also on the analysis front where we have started to create a competitive advantage," he said. "The better we get at forecasting, the better our capital decisions will be."

(Reporting by Barbara Lewis; Additional reporting by Alex Lawler; Editing by Alison Williams).