Another Shale Revolution: Texas Shale Driving Global Gas Prices

  • Date: 07/04/14
  • Jordan Blum, Houston Business Journal

New global contracts for liquefied natural gas in Africa and Asia are being driven by shale gas production in Texas and other top U.S. shale plays, industry analysts said.

Global LNG sales used to be based more on “Japan crude cocktail” pricing, but now global contracts are taking into account local LNG prices near Texas and Louisiana.

The Woodlands-based Anadarko Petroleum Corp. inked new deals to sell much of its LNG production in Mozambique to Asian nations with growing energy demands through hybrid pricing structures.

What is interesting is that Anadarko CEO Al Walker told Bloomberg news that the deals are based on a combination of more-expensive oil pricing and cheaper LNG prices from the Louisiana-based Henry Hub, which is a traditional natural gas benchmark domestically, but not typically as influential internationally.

Dan Pickering, co-president of Tudor, Pickering, Holt & Co., said the deal shows a growing trend that is developing on new contracts and the increasing global impact of the domestic shale boom.

“It tells you how important potentially that U.S. exports are becoming on a global basis,” Pickering said. “I think what you’re seeing, as global LNG expands, both producers and buyers are going to see more flexibility in pricing the commodity.”

The price of gas globally has become a growing debate with prices cheap domestically for LNG that can be sold for four times as much in some Asian markets.

“It’s certainly tied to the fact that the U.S. is a greater player now on the global (energy) scale,” Pickering said. “It’s an example of how the market is looking for new ways to transact.”

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