Gas Gap Divides Australian Iron Ore Billionaires Forrest And Rinehart
Fortunes made from mining iron ore connect two of Australia’s richest people, Gina Rinehart and Andrew Forrest, but gas is opening a gap between them.
Forrest, the man behind Fortescue Metals Group, has been investing heavily in hydrogen as a possible fuel of the future only to last week suffer a setback.
Rinehart, who owns Hancock Prospecting, has been developing exposure to methane, a fossil fuel more commonly called natural gas.
There are other differences between the two billionaires who live in the west coast city of Perth and whose families have strong historic connections, but the gas gap has become a sensitive point for Forrest who is critical of all fossil fuels.
The problem for Forrest is that his focus on “green” hydrogen produced using renewable energy to power an electrolysis process which splits water into hydrogen and oxygen has not yet proved to be commercially viable.
Forrest is reported to have invested more than $1 billion in his attempts to produce commercial quantities of green hydrogen.
Operational difficulties led last week to a change of plan and corporate reshuffle which will see 700 job losses at Fortescue, which is adopting new clean energy targets which involve more wind and solar power and less hydrogen.
The change is significant for Forrest and Fortescue, the iron ore business he created 21 years ago, and which forms the backbone of his wealth which is estimated by Forbes to currently stand at $16.5 billion.
Rinehart, on the other hand, is enjoying greater success her plans to become a major producer of methane to meet an Australia-wide shortfall caused by a lack of exploration and project development as well as opposition from Australia’s green/left government.
In late June, four weeks before Forrest announced the cutback in his hydrogen plans the Australian Government caved in to Rinehart, giving the all-clear for her Senex Energy to proceed with the $1 billion Atlas methane project in a joint venture with Korea’s Posco.
The government assessment process for Atlas, which will tap coal-bed methane, lasted almost two years with approval coming after reports of an economy damaging power shortage in Australia’s major cities and industrial centres.
Rinehart Wins
The proximity of Rinehart’s methane win and Forrest’s hydrogen loss has not been widely recognised in Australia but it’s clear that Rinehart has enjoyed a significant win by choosing a gas which is readily available, easy to produce, and highly profitable which, in turn, means she should widen the wealth gap she enjoys over Forrest.
In a statement announcing the reduced interest in green hydrogen Forrest said Fortescue would continue with its aim of becoming “the world’s leading green technology, energy and metals company”.
His determination to persist with environmentally focused investments worries analysts who struggle to understand how iron ore and green hydrogen are a natural fit, or whether other forms of renewable energy will be any better.
Most investment banks have Fortescue listed as a stock to sell because of its split priorities and concern that the iron ore price is likely to fall next year as Chinese demand wanes and supply rises.
However, Fortescue did impress Macquarie Bank which likes the “realigned core focus” of the company while sticking with an underperform recommendation and Fortescue price forecast of A$14.50 which is 32% below last sales at A$21.27.
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