Miner BHP could exit oil and gas through merger with Woodside

BHP is exploring options to exit the oil and gas sector by merging its assets with Woodside.

The pair confirmed rumours of a merger in short statements that provided little detail other than a discussion about a deal is under way and could involve Woodside swapping shares with BHP for its business.

BHP confirmed it has initiated a strategic review of its petroleum business, which has operating production assets in Australia, the Gulf of Mexico, Trinidad and Tobago, and Algeria.

Andrew Harwood, Research Director at energy consultancy Wood Mackenzie, said: “An exit from its petroleum business has been long rumoured for BHP, and as it faces rising pressure from the energy transition, it would seem that the mining conglomerate has determined now to be the optimum moment to achieve maximum value.”

If the merger were to go ahead, Woodside would absorb BHP’s minority stake in the proposed Scarborough development off the coast of Australia and become the sole owner. Plans are to install floating production systems at Scarborough that will supply gas onshore though pipelines, some via existing infrastructure to the Pluto LNG plant and the Karratha processing plant. A final investment decision on Scarborough is expected later this year.

“Following hot on the heels of Santos’ proposed merger with Oil Search, a Woodside-BHP combination is further evidence of oil and gas operators seeking solace from longer-term uncertainty through scale,” said Harwood. “For the wider Australia exploration and production sector, a second merger proposal will give Australia another homegrown heavyweight that can compete on the international scene.”