PERTH (miningweekly.com) – BHP has confirmed speculation that it is in talks with oil and gas producer Woodside over its petroleum business.

Reports emerged on Monday that Woodside was in advanced talks with BHP about purchasing the diversified miner's petroleum division for A$20-billion.

A report by the Australian Financial Review stated that Woodside was offering shares to BHP in return for the petroleum business, with the shares to be passed to BHP shareholders.

BHP on Monday noted the press speculation, and confirmed that it had initiated a strategic review of its petroleum business to re-assess its position and long-term strategic fit in the company’s portfolio.

“One option is a potential merger of the Petroleum business with Woodside and a distribution of Woodside shares to BHP shareholders. We confirm that we have been in discussions with Woodside. While discussions between the parties are currently progressing, no agreement has been reached on any such transaction,” BHP said.

Woodside for its part said that the company was continuously reviewing the composition of its asset portfolio and opportunities to create and deliver value for shareholders.

“Woodside is engaged in discussions with BHP regarding a potential merger involving BHP’s entire petroleum business through a distribution of Woodside’s shares to BHP shareholders.

“These discussions are ongoing,” the company added.

BHP owns conventional assets in the US Gulf of Mexico, Australia, Trinidad and Tobago, and Algeria, as well as appraisal and exploration options in Mexico, Deepwater Trinidad and Tobago, Western Gulf of Mexico, Eastern Canada and Barbados.

The miner recently approved a $544-million capital investment into its Shenzi North oil project in the US Gulf of Mexico, which represents the first development phase of Greater Wildling, following exploration success in 2017, with the resource and development plan further refined through Ocean Bottom Node seismic data and analysis.

The project will take advantage of existing infrastructure and production capacity in the nearby Shenzi production facility, with value further enhanced through the recent acquisition of an additional 28% working interest taking BHP’s interest in the Shenzi field from 44% to 72%.

The project adds two wells and subsea equipment to establish a new drill centre north of Shenzi with the capacity to produce up to approximately 30-million barrels of oil equivalent a day. Production is expected to begin in the 2024 financial year.