Anadarko Plans LNG Mozambique Sales Based on U.S. Gas, Oil Price

Anadarko Petroleum Corp. (APC) has inked deals to sell gas from Mozambique at a hybrid price linked to both oil and U.S. natural gas prices, Chief Executive Officer Al Walker said yesterday in an interview.

The global explorer, which has announced discoveries off the coast of Mozambique that may contain 70 trillion cubic feet of natural gas, has signed initial agreements with some buyers to sell the gas using a formula that combines Henry Hub and world oil prices and factors in costs for shipping and treatment, Walker said.

The formula is producing a price for liquefied natural gas, or LNG, similar to the oil-linked indexes used now in Asian trading, he said in an interview at the Howard Weil Energy Conference in New Orleans.

“As a producer, I’m not as sensitive to that as the buyer,” Walker said of the pricing models. “We’re fairly indifferent between the two.”

The price of gas sold from seaside export terminals has emerged as a critical issue as the industry races to capture markets in Asia where gas sells for five times more than in North America. Producers are seeking deals linked to high-priced oil to justify projects capable of liquefying the gas for shipment and regassifying it that can cost as much as $50 billion.

Import prices for LNG in Japan averaged $16.06 per million British thermal units last year, compared with an average of $3.729 for gas futures on the New York Mercantile Index, according to data compiled by Bloomberg.

Anadarko expects to see first production from the Mozambique fields in 2018, and Walker has said the country will emerge as the world’s third-largest natural gas producer.

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net Keith Gosman, Jason Rogers

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