BHP driving Australia iron ore unit to record high output

* BHP says Australian iron mines hit quarterly output record

* Division tracking to meet fiscal 2015 guidance

* Investment phase over, focus on costs as ore price sinks (Adds details, quotes analyst comment)

By James Regan

SYDNEY, Oct 22 (Reuters) - BHP Billiton Ltd said on Wednesday it was on track to meet its full-year iron ore production guidance after mining a record 62 million tonnes in the September quarter at its Australian operations, 15 percent over the year-ago period.

The world's third-biggest supplier of the ore has expects Australian production to reach 245 million tonnes for the fiscal year ended June 30. The figure includes output going to joint venture partners at some its Australian mines.

"At Western Australia Iron Ore, we have completed our major supply chain investments and, for the first time in a decade, we have no major projects in execution," BHP chief executive Andrew Mackenzie said in the group's production report.

The miner is relying on iron ore for the lion's share of its fiscal 2015 earnings, which face pressure from weaker-than-expected ore prices, down 13 percent since July 1.

Iron ore was trading at $81.50 a tonne on Wednesday.

Moody's estimates over 300 million tonnes of new and expanded production will enter the supply pool over the next several years.

Given expectations for muted growth in global steel production at least into 2016, this would weigh down prices and the operating performance of iron ore producers.

However, big producers appear to be taking little heed.

BHP plans to cut iron ore production costs by more than 25 percent and squeeze more tonnage from its mines as it tries to overtake rival Rio Tinto (Xetra: 855018 - news) in the number two spot behind Vale SA of Brazil.

Last week, Rio Tinto confirmed its target of mining 295 million tonnes in 2014, up from 266 million last year.

BHP also said petroleum production increased 7 percent to 67.4 million barrels of oil equivalent because of a 49 percent rise in volumes from its onshore fields in the United States.

Copper output slipped 1 percent to 389,0000 tonnes, hindered by lower ore grades, a power outage in Northern Chile and labour disputes over the quarter that offset a strong performance from its 57.5 percent-owned Escondida mine, the world's biggest copper mine

Overall, BHP said the September quarter showed a 9 percent increase in output, enabling it to maintain a production growth target across its commodities portfolio of 16 percent for the two years to the end of the 2015 financial year.

However, Investec Securities said in a client note ahead of the report that BHP was facing a second wave of adjustments from lower oil prices, while copper was also starting to show signs of price weakness.

Mackenzie has identified iron ore, copper, petroleum and coal as the BHP's "four pillars of growth" in the years ahead.

Coking coal prices are down 25 percent in the spot market this year, while thermal coal is selling at its lowest in five years. (Reporting by James Regan; Editing by Chris Reese and Andre Grenon)