BHP and Woodside merge to create Australia’s biggest energy company

Oil refinery

BHP’s oil business and Woodside Petroleum will merge to become Australia’s largest publicly-listed energy company and one of the 10 largest energy companies worldwide.

The deal will see BHP’s oil and gas business merge with Woodside, which is already Australia’s largest independent dedicated oil and gas company. The expanded Woodside will be 52% owned by Woodside shareholders and 48% owned by BHP shareholders.

The merger will allow the new combined business to benefit from the experience and expertise of both companies under joint management, with a greater diversity in products and markets among a shared portfolio.

Woodside says it will stick to its existing targets for reducing carbon emissions, with a net-zero ambition for 2050. In support of the Paris Climate Agreement, Woodside will focus on building and maintaining a carbon-resilient portfolio that includes natural gas alongside new energy technologies.

Detractors say BHP and Woodside have been major contributors to Australia’s unwillingness to move out of the fossil fuel industry, although both companies now have carbon emission plans in place for the future. Some critics claim the deal could see Woodside left with more fossil fuel assets as customers flock to clean energy sources.

The transaction is subject to due diligence as well as investor and regulator approvals. The merger is expected to be completed in the second quarter of 2022.

Will the merger benefit customers?

While the merging companies and their respective shareholders may be the biggest winners of the deal, the Australian energy market may also see some benefits.

BHP will be able focus on both existing and new projects that emit less carbon than their oil and gas assets, such as the recently-announced investment into the Jansen Potash project.

Woodside too suggests the merger will allow them to focus on their carbon emission goals as it heads towards its net-zero ambition.

Statements from both companies say the merger will allow for a greater focus on more environmentally-friendly energy sourcing and operations, which remains to be seen. If both companies turn their focus, or at least part of it, to renewable energy then customers may see wholesale energy prices drop as green power becomes more accessible.

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