BHP Billiton: Petroleum And Mining Business

For the purpose of this essay, I have selected the Anglo-Australian multinational company BHP Billiton. This company deals mainly with metal, petroleum and mining. This company is the largest mining company in the work as measured by the market values of the year 2015 and in Australia, based on the revenue it generates, it is the fourth largest company now, formerly it used to be the largest company. The origins of this mining company dates back to September 29, 1860, when in the Hague Netherlands, during the shareholders meeting in Groot Kerizerhof hotel the company’s articles of association had been approved (2016). The company two months after that acquired in the rich in the tin area of Bangka Islands and Billiton in the archipelago of the Netherlands of Indie which is in Sumatra’s eastern cost (2016). This initial business of this company included in Netherlands the smelting of lead and tin; this was followed by the mining of bauxite in Suriname and Indonesia in the 1940s (Bellany, 2006). During the 1990s  there was a shut-down of the lead and tin smelter in Netherlands in Arnhem. There was also a plant of smelting of tin and refining in Thailand in Phuket which was called as Thaisarco being the shortened form of Thailand smelting and refining company limited. This company is in existence even today (“BHP Billiton | Jobs and careers”, 2016).

The division of mining of the company Gencor Ltd. in South Africa was acquired by Billiton in the year 1994. However, the division of downstream metal was excluded. In the year 1997, the company divested from Gencor (“BHP Billiton | Our History”, 2016).  The Billiton Plc in the year 1997 became the FTSE 100 Index’s constituent (“BHP Billiton | Our structure”, 2016).

Fig: Initial Logo of Billiton

Source: (“BHP Billiton | Our structure”, 2016)

There was a considerable growth which had been observed by Billiton Plc through the 1990s. The portfolio of this company included, in Mozambique and South Africa aluminium smelter, in Colombia and Australia operations for nickel, in Canada, South Africa and South America Mines of base metal and in South Africa, Australia and Colombia the coal mines, it also had interest in operations in Suriname, Australian, Brazil for aluminium and in South Africa for the steel, ferroalloys and titanium minerals. There was a merger in 2001 of the Billiton Plc with the Broken Hill Proprietary Company Private Limited (“BHP”) and the company BHP Billiton was formed (“BHP Billiton to proceed with Rapid Growth Project”, 2008).

This company BHP had also been nicknamed as the “Big Australia”, it was in 1885 that this company had been incorporated. At western New South Wales at Broken Hill in Australia this company was operating the lead and silver mine (Henderson, 2016). It was on August 10^th, 1885, that the group Broken Hill first floated in the market (Henderson, 2016). The company’s first consignment of the Broken Hill ore was smelted at Melbourne Spotswood, at Intercolonial Smelting and Refining Company. There was a lot of interest that was exhibited by the Melbourne Bank City in Collins St. at the resultant silver weighing about 36,605 ounces. It was asserted by some of the sceptics that the silver was being used which had been brought from somewhere so that the company can get its shares ramped up.

The company in the year 1915 ventured out into the business of steel manufacturing, the operations of this company were initially based in Newcastle, New South Wales, primarily. It was due to technical limitations of being able to recover from mining the sulphide ore that was low lying value, that there was a move from the mining of ore at Broken Hill to opening at Newcastle, a steel works (Imai, 2001). The Iron Monarch and the Iron Knob being discovered near the Spencer Gulf’s western shore combined with the A.D. Carmichael BHP metallurgist aided development of the technique by which there was separation of the zinc sulphides from the earth and rock which accompanied it led to the implementation by the BHP a process which was startlingly cheap and simple process of being able to liberate metals that were valuable of vast amounts out of the sulphide and included big heaps of slimes and tailing which measured up to 40 ft. High (McIntyre, 2005).

The BHP Billiton Limited in the year 2015 had in Australia 42829 employees, and this included their employees from the various subsidiaries which were under the control of the company. Further, globally in the 16 countries across 96 locations this company has 80,368 employees and contractors.

The British BHP Billiton Plc and the Australian BHP Billiton Limited have been listed separately and have separate bodies of shareholders. However, their operation is as one business and has a board of directors which is identical to each other also they have a single structure of management. The BHP Billiton Group & the BHP Billiton Limited (Australia) have their global headquarters in Australia, Melbourne.

There regulatory obligations which effect the BHP Billiton’s operation in Australia. These regulatory obligations restrict potentially the competition and lead to a reduction in their production as well. The Australian Jobs Act 2013, there is an unnecessary imposition by this legislation on the businesses which are involved in undertaking projects that are involved with $500 million or more than that, by requiring them to prepare and implement in relation to their projects an Australian Industry Participation Plan. There is already a substantial focus which the BHP Billiton puts upon the strategies of local procurement where these local products are competitive with the alternatives that are available. There is the addition of complexity and cost which is unnecessary due to this legislation with respect to procuring for the capital projects that are major and also there is the duplication of the state governments’ requirements which are already in existence as well as the corporate practices which are there. The Western Australia’s Domestic Gas (Domgas) Policy this legislation requires that there should be reservation of gas for purposes that are domestic in nature and consumption, there is a risk which lies significantly due to this policy of their being a reduction in the supply of gas investments. Thus, resulting perversely in there being a shortfall in the domestic supply as well and for the country as well for not being able to take the advantage to the fullest of the endowment of resources that it has, which includes the maximisation of the opportunities of being able to export into the international markets LNG. The Coastal Trading (Revitalising Australian Shipping) Act 2012 there is a labour standard and licensing which has been introduced through this legislation which makes is costly and difficult for vessels that are flagged foreign to provide shipping services intrastate and interstate. This leads to there being a reduction substantially in the competition in this sector; there is an increase in the cost of shipping intrastate as well as interstate, and the competitiveness in decreased in the products of Australian, which are relying on this mode of transportation (Vollans, 2004).

The Treaty on Non-Proliferation of Nuclear Weapons has had an effect on the products of the BHP Billiton with respect to the mining of uranium. This treaty has had a major impact on the production as well as the sale of uranium in Australia. As per this agreement, the uranium that is mined can be sold only to the countries which have a bilateral safeguard agreement with Australia. The uranium in Australia maybe exported only for purposes that are peaceful in nature under the safeguards of bilateral agreement network (Noonan, 2009). There is a right which is retained by Australia to be selective with respect to the country with which it is ready to establish the arrangements of safeguards. The customers that are non-nuclear state are required to at the minimum have been a party to the Treaty on Non-Proliferation of Nuclear Weapons and with the IAEA has in place a full scope of safeguard agreement. With the IAEA an additional protocol is a pre-condition that there will be the supply of uranium by Australia only to peaceful countries which are non-nuclear in nature (Noonan, 2009). There is assurance which is provided by the Nuclear Weapon state customer that there will not be any direction of the uranium from Australia for uses that are explosive in nature or non-peaceful in nature and accept that the IAEA safeguards cover the uranium that is mined from Australia. These requirements have made the company dependant for approval of expansion projects of the products as well as the sale of it (McIntyre, 2005).

Though there are various restrictions that have been placed by the safeguards on the sale of the uranium that the company is producing due to the fact that it can only be sold to those countries which will use it for purposes that as per the IAEA safeguards and with which the government of Australia agrees to transfer its uranium to. This treaty has been welcomed by BHP Billiton and they have developed projects in line with the compliance that is required under it. The recent signing of the Australia-India Civil Nuclear Cooperation Agreement has also been welcomed by the country. This agreement along with the safeguards which hare to be placed appropriately would lead to it being a step that is extremely important for being able to provide with energy to approximately four hundred million people who are currently living in India without electricity.

This role of government of regulating the sale of uranium and the use of the uranium mined from Australia is to be used exclusively in the industry that is for civilian power, and there is a system that has been put in place even for external monitoring of the use of uranium for ensuring that there is compliance.

There are various complexities that have arisen due to these compliances with the treaty as the company can now only sell the uranium under the strict monitoring of the government. The mining projects for uranium are subject to the approval of the government. These projects are rare and so the cost of opportunity so there would be a loss of both economic as well as human labour in the case where there is rejection from the government of Australia from proceeding with such projects. For losing projects like this for the mining company would mean that a rare opportunity of continuity and stability is lost in the mining of uranium in Australia. There are various economic benefits that might have to be forgone by the company due to its attempt at achieving compliance with the treaty. This would collaterally effect even the domestic consumption is Australia and the living standards of the people. There would also be a loss of opportunity when it comes to business in Australia. Though there are various ways in which the treat has affected the uranium mining for the company, and has led to the company’s dependency on the government with respect to projects on mining and production of uranium and further sale of the same in the international market due to which there has been an increase in the complexity as well as cost in the concerned industry of mining. However, this treat has been for the greater benefit accepted and welcomed by the company, and attempts are being made by it to comply with the same. However, even for the community at broad no expansion in the production of uranium would mean a loss of a service for human facilities that has improved and safer access.

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