North Australia Digest – 30/11/2012

by 30 November 2012

The Australian 

BHP Billiton chairman Jac Nasser has told shareholders that global economic problems will take time to be resolved and warned China’s growth was slowing. Speaking at BHP’s annual meeting, Mr Nasser said despite the bleak short term outlook, further urbanisation and industrialisation in China would support growth in demand for commodities.

Rio Tinto is set to cut US$7 billion from its cost base over the next two years with Australian coal operations high on the list of  those set to feel the knife. Rio Chief Executive Tom Albanese warned that Australia’s dominance of the global seaborne trade in coal was under attack because of structural shifts in the global energy market caused by the shale gas boom in the US, and ballooning capital and operating costs in the local industry.

The latest Australian Bureau of Statistics survey has confirmed the Reserve Bank’s prediction that the peak in the resources investment boom will come sooner than previously thought. Resource companies have cut $10 billion from their estimated 2012-13 spending since the latest survey three months ago.

Although not specifying the increase, Chevron chief executive John Watson admitted costs had risen at the massive Gorgon Australian natural-gas project but declared the project remained economical. Mr Watson cited the effect of the strong Australian currency, the impact of tropical cyclones that have delayed operations and the struggle to find skilled labour amid the boom in the Australian energy and mining sector as affecting costs.

BHP chief executive Marius Kloppers has signalled he will not back floating LNG technology as a near term development option for Browse LNG project. “I’m sure we’re going to see floating investment in Australia in other projects over the course of time as that technology matures,” Mr Kloppers said. “But today it’s difficult for me to comment on something that does not yet exist.”

The Australian Financial Review

Rio Tinto’s announcement of cost cutting will primarily effect coal mines in Queensland and NSW. Chief executive Tom Albanese said “a sense of entitlement” had contributed to poor productivity at the mines where workers are unionised, compared with the strongly performing West Australian iron ore assets.

Rio Tinto’s admission of high costs may be embarrassing for the company, but Tony Boyd argues it is positive the company has woken up and is providing hard targets for future cuts.

The chorus of warnings from Rio Tinto and BHP Billiton offer a worrying insight into the gravity of the competitive challenges facing the Australian coal sector, and industry that was until recently our single biggest export earner.

BHP has signalled the group may exit the Browse liquefied natural gas project if the government insists it be built at James Price Point. Chief Executive Marius Kloppers warned the company would exit the venture if it didn’t stack up against competing investments. His comments will fuel speculation that some partners in the Woodside Petroleum-led Browse LNG venture would prefer to see the 15 trillion cubic feet Browse gas resource developed using floating LNG technology rather than onshore on the Kimberley coast. This contradicts The Australian’s interpretation of Mr Kloppers’ comments.

The West Australian

WA farms are being targeted by China’s biggest agricultural conglomerate as part of plans to invest $4 billion in Australia. The Beidahuang Group has paid $52 million to snap up about 30,000ha in the past month and the purchase of more farms is being finalised as part of its strategic spending spree.

The Courier Mail

In response to figures released by the Australian Bureau of Statistics yesterday, AMP chief economist Dr Shane Oliver has warned that the peak in the mining investment boom is imminent. “It does look as if mining investment is peaking,” Dr Oliver said. “There has been a worrying drop in momentum and this data shows there is nothing to replace the mining boom as a driver of the Australian economy.”

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