Gas growth won't kill coal, says BHP

BHP Billiton boss Andrew Mackenzie believes over 70 per cent of the world’s energy will still come from fossil fuels by 2030 despite noting the impact of such energy sources on the world’s climate.

“Warming of the climate is real, human activity is the dominant cause of this warming and physical impacts are unavoidable,” he said at a conference in Houston.

“[However], the world will continue to rely on fossil fuels over the long-term because their continued supply is vital to the development that will deliver huge reductions in abject poverty and improvements to all our living standards.”

This reliance will be significant, with coal, gas and oil still the most affordable options in many regions and suited to existing infrastructure.

“Every nation will choose a different mix which balances affordability and security of supply to fulfill their demand,” Mr Mackenzie said.

“But over the next few decades fossil fuels will remain central to the energy mix as their affordability and the scale of our existing infrastructure make them hard to replace.”

BHP’s chief executive said that, despite growing significantly from a relatively low base, renewables would remain largely on the periphery until “large-scale and cost-effective” energy storage options are available.

Among fossil fuels, Mr Mackenzie tipped gas to be the main source of growth out to 2030, but coal is seen unlikely to be left behind anytime soon.

“Gas is expected to see the strongest growth through wider use in power and transportation. But the shale gas revolution is unlikely to go global quickly,” he said.

“And despite what many claim, we are unlikely to see gas replace coal globally at the scale and pace seen here in the US.”

Mr Mackenzie weighed into the ongoing gas export debate in the US, suggesting the nation should look to cash in on its shale gas riches, with the concern over higher domestic prices overplayed. This fear is often linked to the gas price differential between Australia and the US.

“As the largest consumer of gas in Western Australia, as well as a major producer, we know that the price difference is due to the higher cost of offshore production compared to shale – not exports,” he said.

“An open market has enabled the development of Australia’s reserves, made it one of the world’s leading gas exporters and bolstered the economy."

Any exports from the US will be slow to come online, he added, in good news for local gas projects.

The head of the world’s largest miner also appeared to throw his support behind carbon pricing, but suggested any such market action to climate change would largely be limited to regional action as a global climate agreement remained elusive.