MercoPress. South Atlantic News Agency

Billiton-Rio Tinto merger could help Falklands' oil plans

In the event of a successful takeover by BHP Billiton of Rio Tinto the new merged giant would consider selling a 1.5 billion potash project in Argentina which would facilitate developing Billiton oil and gas exploration off shore the Falkland Islands, according to reports in the Australian press.

Speaking to the media after his marathon Petroleum Division presentation on Wednesday, BHP boss Marius Kloppers noted that in the wake of the merger between BHP and Billiton in 2001, about 15% of the combined assets were sold after being judged non-core, and he would expect a similar level of sales to result from the proposed merger with Rio Tinto. He estimated the wash-up in the event of a Rio Tinto take over could involve asset sales of about 50 billion US dollars. Among the assets mentioned by market analysts are combined diamond mines in Canada; titanium feedstock operations; coal mines in South Africa and "a combined BHP-Rio could also elect to sell Rio's 1.5billion US dollars potash project in Argentina". BHP would face potential headaches developing the project after having put Buenos Aires offside by sealing a deal to explore for oil and gas offshore the disputed Falkland Islands, Malvinas for the Argentines, reports the Australian press. Argentina has warned BHP it faces potential sanctions after Argentina last year dumped a hydrocarbons exploration and exploitation accord with Britain about the Falklands in protest at the British unilaterally granting exploration rights. Speaking to London's Financial Times about the possible merger Kloppers said that "we've got a critical threshold on things like size and resource life". "When you put these two companies together that threshold lifts. I wouldn't be surprised if we continue to work out assets (from the combined group) at the same kind of levels as before." However Mr Kloppers said he did not think BHP would have to sell any iron ore assets to appease competition regulators. BHP has delayed handing in its final application to the EU as it has been locked in extensive talks with the regulator to try to head off any competition concerns. On Wednesday, BHP said 90% of the application was completed and it planned to lodge its submission within weeks. A BHP spokeswoman said it was "premature to be specific on any potential assets sales that would occur as part of a divestment program following the combination of the companies".