BHP's shale oil pipeline hit by corrosion


BHP Billiton has closed a portion of its onshore Texas shale oil and gas pipeline system because of corrosion issues discovered five months ago.

The closure, which was due to unexpected microbiological activity, was revealed yesterday in the US accounts of its Petrohawk Energy unit acquired in 2011.

"Portions of the Eagle Ford gathering line system have been temporarily isolated while the cause of potential corrosion issues is being analysed," said Petrohawk, which is still required to lodge US accounts for its debt holders.

"We are continuing to produce from this field and have increased the use of trucking to deliver our condensate to the market, which is expected to mitigate any significant impact on production."

Yesterday, BHP would not say what proportion of oil and gas production the outage affected or whether the trucking would have a significant effect on costs.

The oil-rich Eagle Ford shale is the most productive and profitable shale ground BHP acquired in its $US20 billion of US shale gas and oil purchases in 2011.

A spokeswoman said the company had immediately shut the affected sections of the pipeline when the corrosion was discovered in September and had notified government authorities.

"BHP Billiton is conducting a full investigation, and has mobilised a dedicated team to assess this pipeline system and implement a remediation plan," she said.

The petroleum division is expected to make up $US2.77bn ($3.06bn) of BHP's forecast $US11.8bn first-half earnings before interest and tax, second only to the iron ore division, when the mining giant reports its earnings tomorrow.

According to UBS-compiled estimates, analysts are expecting a reported group underlying net profit of $US6.95bn, up 17 per cent on the first half of 2012-13.

With BHP and rival Rio Tinto focusing on cutting operating costs and development spending to pay down debt, much of the focus tomorrow will be on the progress reported in these areas.

Top of the list for the investors who pushed the big miners to rein in growth plans in return for capital management will be any signs that BHP is getting ready to return cash to shareholders.

"One of the key discussions in the market is whether BHP could announce a buyback," UBS said in a client note.

"We do not expect BHP to announce capital management at the interim result."

Add A Comment:

Name:

Location:

Comment:

Spam Check:

Comments:

Login:

Username:
Password:
Not a member? Sign up | Forgot password?

Featured Ads

LIKE US ON FACEBOOK

MOST COMMENTED ON THIS MONTH

  • No Comments

Latest GOOGLE Headlines

LATEST BBC Headlines

LATEST NY Times Headlines

LATEST SMH Headlines

Useful Links