BHP Billiton’s carbon bomb


Bob Burton

BHP Billiton’s Annual Report was released two weeks ago, and buried within it is data that reveals that the mining giant has over 16 billion tonnes of coal tucked away in projects that they are either mining now or would like to mine soon.

If all the coal in BHP Billiton’s hoard was burnt it would produce over 44 billion tonnes of carbon dioxide, the equivalent of over 80 years’ worth of Australia’s current level of emissions. In short, BHP Billiton’s coal stockpile is one of the world’s largest unexploded ‘carbon bombs’.

While not all of BHP Billiton’s current coal stash will be recovered and burnt, especially given current prices, the company is adamant that coal has a rosy future and is likely to want to add billions of tonnes more of the world’s dirtiest fuel to its collection.

BHP Billiton’s major coal interests are scattered around the world. In Australia the company has over 3.6 billion tonnes of coal in the ground at its Mt Arthur mine in the NSW Hunter Valley and another 10 billion tonnes across a suite of mines and potential projects in Queensland. The company also has over 1.5 billion tonnes of power station coal as its share of the Cerrejon coal mine in Colombia and the best part of another billion tonnes at its IndoMet Coal Project in the forests of Central Kalimantan in Indonesia.

Not only does the coal under BHP Billiton’s control represent a huge risk to the global climate, it is also proving to be a financial dud. On the 84 million tonnes of coal it sold last year, the company made just $A497 million before interest and tax. It is a result so poor that BHP Billiton’s President of Coal, Mike Henry, publicly complained recently that the company made just 3 per cent on the capital it invested. BHP Billiton would do better for shareholders by sticking their money in a term deposit in a bank.

Risks abound

Risks to BHP Billiton’s coal plans abound. The market for power station coal is being eroded by the rise of energy efficiency and renewable sources of supply such as solar and wind power. China’s crackdown on air pollution – driven by public outcry about the horrific health toll imposed by coal burning – is slashing demand for power station coal. And China’s economic slowdown and restructuring has meant lower rates of steel production, affecting demand for metallurgical coal. (BHP Billiton produces roughly equal amounts of coal for power stations and steel mills.)

As BHP Billiton’s climate policy states that they accept the need for urgent action on climate change, they face a dilemma on what to do with their ‘carbon bombs’. Do they acknowledge the rise of cleaner alternatives to coal-fired power stations and ditch coal? Or do they stubbornly press on regardless and hope all the fuss will just fade away?

BHP Billiton has decided on the latter route. Their climate policy rings hollow when lobby groups which represent them – such as the Minerals Council of Australia and the Queensland Resources Council – seek to disparage and undermine renewables while demanding subsidies for new projects such as Adani’s Galilee Basin mine and railway. BHP Billiton’s and the Minerals Council’s strong promotion of ‘efficient’ coal power stations abroad as a way of locking-in demand for decades more also flies in the face of climate science, which shows that we need to stop building new coal plants and shut down existing ones.

In the last few weeks the company has hit the panic  button as it has realised that when the United Nations’ climate negotiations open in Paris in December the coal industry will be in the spotlight. Even the oil and gas industry have shown they are prepared to throw coal under the bus, and now refuse to defend the sector.

If BHP Billiton won’t defuse their carbon bombs, who will?

Investors and banks increasingly want out of risky coal companies, farmers prefer agriculture over mines, citizens – whether in China, India or Australia – are demanding clean air and water while consumers want clean energy. Recently BHP Billiton’s Mike Henry lamented that “there is a widespread public view that coal use will be phased out over the next 10 to 20 years in favour of renewables.”

As the world increasingly shuns coal – whether for health, environmental or financial reasons – people power may succeed in defusing BHP Billiton’s ‘carbon bombs’ far faster than the company’s  coal executives would ever care to admit.

Bob Burton is the Hobart-based Editor of CoalWire, a weekly bulletin on global coal industry developments. (You can sign up for it here.) Bob Burton’s Twitter feed is here.