Replacing Diesel with Gas – Fortescue Metals Group’s Energy Plans for the Future

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In order to save money and reduce energy costs, Nev Power, Fortescue Metals Group CEO, has stated that the iron ore giant is looking at switching from diesel to gas. The proposed change could halve Fortescue’s energy costs and save the company around $428 million a year.

In the wake of the company’s continued efforts to stick to its debt reduction plan, Fortescue has been looking for ways to reduce their operating costs; lowering its energy expenditure is a key part of the company’s saving plan.

The switch from diesel to gas would not be easy, however, and would be introduced incrementally over a long period of time.

“Our first priority will be switching our power stations over to gas,” said Power to The Australian. “Then from there it will be a progressive changeover to gas through our mining fleet. Some of it will be as we replace that gear, as we buy new trucks we will buy trucks that run on gas, some of it will be converting of existing equipment.

“Unfortunately it’s not a quick process, but we’re looking at this for the very long term from both a cost of that energy but also the emission footprint we can reduce.”

Like other large iron ore companies Fortescue Metals Group has matched expansion efforts with the rest of the industry, reaching their target production goal of 155 million tonnes of iron ore per annum after a 7-year phase of expansion. However, the expansion efforts of the industry have caused a quick increase in supply, leading to the significant drop in iron ore prices this year.

Although the lower price of iron ore means it’s going to take Fortescue longer to execute its planned debt reductions, Power made it clear that the company is still committed to its plan.

For the 2014 fiscal year, Fortescue repaid $US3.1 billion of its debt, lowering their total debt to $US7.1 billion. The next 18 months will see another reduction of debt by between $US2 billion to $US2.5 billion.

“We’re focused on that target of getting our gearing below 40 percent and the speed at which we get there will be determined by free cashflow from operations,” shared Power.

Information sourced from The Australian.

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