28 November 2019
Fit for the future
Jonathan Price, Chief Transformation Officer
Resources Technology Showcase
28 November 2019
It is a pleasure to be here in Perth, a city my family and I once fondly called home.
Before I begin, I’d first like to acknowledge the Whadjuk [Wod-juk] Noongar people as the traditional owners of the land on which we are meeting today. I pay my respects to their elders, past and present.
I have been with BHP for more than 13 years working across a variety of roles in Western Australia, London and now Singapore. I started my career as a process improvement engineer in a nickel refinery. Many years later, I moved to Perth for a role in BHP’s nickel business, and went on to spend a number of years in our Western Australia Iron Ore business.
It would be fair to say that my experience of both these great businesses involved a good degree of transformational change.
Many people assume transformation means facilitating large-scale change. By definition, it is a ‘marked change in form, nature, or appearance’ and one that it is irreversible.
As we transform BHP, there is certainly an element of that, as we have introduced systems, structures, processes, technologies and a new operating system as platforms for change. I’m sure that to many of you that sounds like a great deal of disruption for any business.
The irony is that our change will help us produce more stable and predictable operations. That’s because our people-centric approach to change builds capability, and empowers our teams to access the tools and data necessary to make better decisions.
That’s the dichotomy of my role. It’s double-edged – managing the transition to a new way of working without missing a beat in terms of operating performance.
Sounds simple right?
Today we exist in a world of rapidly changing stakeholder expectations, exponential technological advances and an evolving gig economy. We have to see around corners. Anticipate what we might need, so that we’re future proofing the business along the way.
So today, I want to outline some predictions that are relevant to transformation. Predictions help us peer into a potential future that has yet to unfold. But they are not an exact science as the following examples show.
In January 1989, the then leader of East Germany said ‘The Wall will be standing in 50 and even in 100 years’. By November that same year, the Berlin Wall had crumbled.
In April 2007, Steve Ballmer, the then CEO of Microsoft, said ‘There’s no chance that the iPhone is going to get any significant market share. No chance….’. A few months later, Steve Jobs launched the iPhone that revolutionised the way we interact with our phones and the world around us.
And the New York Times website on the morning of the last US Presidential election gave Hilary Clinton an 85 per cent chance of winning.
We all know how that turned out.
Now these examples of misplaced confidence in the status quo demonstrate that the world changes in ways that we can not predict – and we have to be ready for an uncertain future.
This is essentially the aim of our transformation: to ensure our business thrives under a wide range of scenario’s and possibilities.
At the risk that someone else could stand up here in a few years’ time and prove me wrong, today I want to talk to three trends, that I believe, we will need to respond to in the near future.
And a snapshot of our response as we transform BHP.
ONE: Low carbon operations: a necessity not an option
In a short period, we have seen climate change escalate from largely the domain of scientists to a daily talking point. It will continue to have ramifications not just for mining, but the world for generations to come.
That’s why the first trend I see is that carbon neutral operations will become a necessity, not a ‘nice to have’.
To be clear: BHP’s long-term goal is to achieve net-zero emissions from our operations by 2050.
This is an aspiration that we were not forced to undertake. BHP has a long history of climate advocacy and investment in emissions reduction, but we recognise there is a growing urgency and importance in accelerating our transition to net zero operations.
At present, there are others who might not feel this imperative. But I think soon enough, pressure from society, investors and employees will force their hand.
We believe that the world must pursue the twin objectives of limiting climate change while providing access to affordable energy.
We do not prioritise one over the other – both are essential to sustainable development.
What is desperately needed is a greater effort to drive energy efficiency, develop and deploy low emissions technology, and adapt to the impacts of climate change.
There is no ‘silver bullet’ here.
Every business sector will now need to determine the best way forward and mining is no exception. At BHP, we are working through options for each and every business, whether it be a copper operation in Chile, or an iron ore operation here in Western Australia.
For example, we started trialling electric vehicles at Olympic Dam in South Australia in 2018. And we will soon expand this to our iron ore and nickel businesses in WA. The Olympic Dam trial is providing us with valuable data and information to understand how we may continue to electrify different forms of transportation, and material movement in our operations.
Early results indicate significantly reduced maintenance time, and very positive operator feedback on the vehicle – not only are they smooth to drive, they’re quiet – and with no diesel exhaust and dramatically reduced greenhouse gas emissions.
As we consider the role electrification will play in a decarbonised BHP, we must also consider how we source power. In October, we announced four new renewable power agreements at our Escondida and Spence operations in Chile. The contracts will displace 3 million tonnes of CO2 per year from 2022, compared to the fossil fuel based contracts they are replacing – this is the equivalent to the annual emissions of around 700,000 combustion engine cars.
We are exploring options to do something similar here in Australia.
BHP is currently in the market for innovative power solutions for our Eastern Australia Mineral Assets. We have received a positive response from the market, consulting over 40 different parties. We expect to make a decision on this in the first half of the 2020 calendar year.
Consistent with our recent Chile power procurement we are pleased to see renewable energy technologies appear competitive against traditional fossil fuel sources.
We also recognise what could really change the game is technology that doesn’t even exist yet. So we need to turn to innovation and strategic partnerships.
In March this year, we announced a commitment to invest US$6 million in Canadian-based company, Carbon Engineering Ltd to progress the development of Direct Air Capture - which removes CO2 from the atmosphere.
Direct Air Capture has the potential to play a significant role in the world’s response to climate change. By progressing the technology from research through to demonstration, and finally to commercial deployment, BHP and others can give this technology the best chance to make that contribution.
We also recently announced our Climate Investment Program, through which we will put more than half a billion Australian dollars to work over the next five years. With these funds, we will invest in technology with the potential to reduce emissions throughout our supply chain.
It will allow us to work with others to drive actionable projects that reduce greenhouse gas emissions, both up and down our supply chain.
By making sure our own ‘house is in order’ and by protecting demand for our products, we will preserve and create value for BHP.
TWO: Fully integrated technology
The second trend I would like to talk about, is the role of technology in mining. It is clear from what we have seen at this conference that technology hugely impacts our industry. But I see a world in where technology finds it’s way in to every aspect of the work of a resources company.
The ramifications for culture and capability will be massive.
Historically, technology in mining has primarily focused on IT.
Something breaks, so I call the help desk.
I need new software, so I call the help desk.
I need a laptop…..so guess what, I call the help desk.
Increasingly technology is becoming a close partner of all our operations. As a result, automation and robotics are being rolled-out, and digitisation is helping planning and monitoring with far greater precision.
As a whole, the industry has benefited.
A great example of this benefit is our remote operations centres, or IROCs. We launched our very first IROC here in Western Australia back in 2013. Three years later we took the lessons learnt from this and built an IROC in Brisbane, overseeing our east coast coal operations. Now we have a centre operational in Santiago and have one planned in South Australia.
With each new deployment we learned from the last, and we have become both faster and more cost efficient.
As technology is increasingly embedded across the entire supply chain, through new initiatives like our IROC’s, technology will not just have a seat at the table, it will be part of every seat at the table.
What I mean by this, is that every function and every person will need some level of competence in technology regardless of whether you are in finance or mine planning.
This is both a challenge – and a huge opportunity.
To prepare our vast workforce for this shift away from traditional mining towards digital innovation. A shift that will see our workforce, equipment, and systems connect in real-time.
Two things we have to absolutely get right, are our culture and capability.
We need a culture that is fast-paced and dynamic and empowers people to collaborate and continuously deliver change. And importantly, a workplace where we can fail fast and learn quickly.
An example of where we have done this is at our Innovation Centre down the road here in Perth, at Welshpool. There, we are giving our people the time, space and funding to turn ideas into reality. It is quite literally a space to bring ideas to life using our own resources, or partnering with others. We encourage our people to think big, fail fast, learn and improve.
One great initiative that has resulted from this work is a pedestrian avoidance system that is fitted to forklifts to improve safety. This has been developed and tested in house –piloted at Eastern Ridge in Newman, Port Hedland and Nickel West.
This approach is more typical of something you’d see in Silicon Valley than Perth, Western Australia.
But this is the future of mining.
And to complement this culture, we need the right capabilities.
We must prepare and train our workforce to make sure they have the right skills in order to embrace new technology and a digital future.. We’ve had a lot of success helping our mine controllers be trained on cutting edge technology when they moved to our remote operations centre.
And we want to build on this.
Here in WA, we are supporting the State Government, TAFE and industry to enable vocational students the option to study automation. This alliance puts in place the steps to build autonomous capabilities of the Western Australian workforce, and includes Australia’s first nationally accredited courses in autonomy.
In Queensland, we have partnered with the Resources Council, TAFE and the State Government to deliver training programs to enhance foundational digital skills. We are also working with high schools to help students’ complete Remote Pilot certificates as part of their senior studies – upon graduating they will possess the highest possible accreditation for drone piloting in Australia.
And at our Goonyella mine in Queensland, automation will create 100 new roles in maintenance, control and technology. To prepare our people for this we will deploy 40,000 hours of training across the workforce.
These are skills that everyone is going to need in the future - not just the person on the help desk I spoke about earlier.
This deliberate approach to fostering the right culture and investing in the right capabilities, is key to ensuring that technology can be an integral part of everything we do.
THREE: Data will drive outperformance
As technology finds its way into mining in new and different ways, and we attach sensors to fixed plant and mobile equipment across all of our sites, the sheer amount of data available to us will be like nothing the industry has ever seen before.
But just having access to petabytes and petabytes of data won’t mean anything in and of itself.
So here is my third and final trend: those who make sense of data will thrive, and those who don’t will falter.
As much as we hear about big data and analytics, the reality is too many of us work too hard for data. What we really need is data to work hard for us.
Making data work for us
At BHP, we are connected in more ways than ever before. Our enterprise-wide global SAP system ensures we have transparency and data integrity.
Whether they are in Santiago or Newman, our employees know that they have one single source of the truth when it comes to the data vital to decision-making, easily accessible by any mobile device such as smartphones or tablets, so employees can access data and perform tasks on the go, in real time.
How do we make this data work for us? Our Maintenance and Engineering Centre of Excellence provides very tangible examples.
Any time our equipment breaks down, it can have ripple effects across the supply chain. It costs us time and it costs money. So preventing breakdowns helps us to maintain safe and predictable operations and can unlock a lot of value.
Data helps our maintenance teams do exactly this. And with more data, they can do more to benefit our business.
The size of the prize is immense. In Australia alone, we look after 3,000 machines and conduct almost two million maintenance jobs annually.
Overall we are using data to increase equipment availability by more than 3.5% by FY22, and reduce maintenance costs by between 15 and 25 per cent by FY24.
We are also working on a number of projects that use data to determine the conditions of equipment in real time and evaluate when maintenance should be performed to pre-empt equipment failure, so that it can be replaced before it breaks down. This in turn can be used in machine learning algorithms to create smart alerts for our maintenance crews.
So rather than being reactive, we are being predictive.
Our team up at Yandi in the Pilbara are developing a predictive analytics tool to pre-empt breakdowns on one of the most vital pieces of kit in the operation: our conveyor belts. Using data, they have developed a tool that reads the condition on the conveyors and helps to predict when the belts will misalign or rip and lead to run-offs. When these situations occur, production grinds to a halt.
Preventing them then avoids lost production revenue, and saves on costly maintenance. It also helps us to better schedule planned maintenance, which is far safer for our people.
Since the inception of the Maintenance and Engineering Centre of Excellence in February 2017, we have increased the availability across critical fleet by up to five percent in some operations, and improved our prediction of a range of engine and brake failure systems.
Equipment condition is not the only thing we are using data to predict.
We do not own ships ourselves, but we charter 1,500 voyages per year for all our commodities combined. These Vessels travel a distance that is equivalent to 29 trips to the moon and back each year.
Weather and safety make this an unpredictable game. Everything ends up where it needs to be, but efficiency in the shipping process can vary greatly.
But shipping is an industry with a long history. This means there is plenty of data to exploit.
So we have worked with ship owners, the ports and our technical managers to create an algorithm that uses data to better predict vessel safety performance, which reduce risks and delays in the supply chain.
Better planning can save a lot of money and this initiative is expected to deliver millions of dollars in benefits beyond financial year 2020.
So increasingly you can see we are making the data work for us. We are anticipating rather than reacting. And by doing so, we are creating a much more stable and reliable operation, because our people have the capabilities and the culture to use all the tools and data at their disposal.
And what’s more, many of these initiatives are being led by teams based locally here in Perth.
Today, I have outlined three emerging trends::
- Carbon neutral operations becoming a necessity;
- The importance of culture and capability as technology finds its way in to every role and function;
- And data driving outperformance into the future.
Now you may agree or disagree with me. But the common theme that threads these together is change. Walk around this conference and you’ll see all sort of ways the industry we work in and way we perform work in the future is changing.
The pace of this change will only accelerate, and resource companies need to act.
At BHP, we are doing this through our Transformation agenda.
Our Transformation is not based on one single prediction, but setting up the conditions for our people to succeed in a world where change is the only constant.
It isn’t easy – we are challenging an industry with a long history of success and established norms. But the opportunity is immense and our people are up for the challenge.
From my years in WA, working in our Iron Ore and Nickel businesses, I have seen first-hand how the state leads the global resources sector.
Transformation is therefore not only important to BHP but the sector as a whole, and to WA. Through safer, more sustainable and more productive operations we can make sure the future of the state is secured and the industry continues to provide the resources needed to build a better world.
As we transform, we will attract the best and brightest to the exciting world of resources. The beauty of this is that fresh ideas and new ways of working will piggy back on the ideas that come before them. So with momentum on our side, I think we will start to see a lot of positive change, to the benefit of us all.
I look forward to sharing our story as it progresses, and seeing more from the broader industry in the future.