Apache Is Set to Sign Australian Gas Contract at Higher Price By...

Apache Is Set to Sign Australian Gas Contract at Higher Price

By Angela Macdonald-Smith

Sept. 3 (Bloomberg) -- Apache Corp., operator of the Reindeer natural gas field in Australia, expects to sign within about two weeks a seven-year contract for the sale of gas from the project at a higher price than existing agreements.

The supply accord, to be signed with a Chinese-backed iron ore project, is priced at ``a multiple'' of the $2 a thousand cubic feet that Houston-based Apache is now paid for its gas in Australia, Chief Executive Officer Steven Farris said yesterday at a Lehman Brothers conference in New York.

Apache and partner Santos Ltd. in April committed A$800 million ($670 million) to develop Reindeer for sales into Western Australia, where prices for the fuel have tripled as some companies focus on export projects for higher returns. Citic Pacific Ltd., the Hong Kong-traded arm of China's biggest state-owned investment company, is developing a A$5.2 billion iron ore project in Western Australia, to start up in early 2010.

``That contract by itself will pay for the development of the project,'' Farris said. Apache recently signed a shorter- term Australian contract to sell gas at about $7 a thousand cubic feet, he said.

The Reindeer contract will be partly based on a fixed price and partly on a liquefied natural gas price formula, Farris said.

Australia may be Apache's highest-growth area over the next three to four years, Farris said. The Van Gogh oil project off Western Australia is due to start up in the first quarter of 2009, followed by the Pyrenees project, probably at the end of 2009 and Reindeer in 2010, he said.

Julimar, Pluto

Discoveries around the Julimar gas field, holding about 2.5 trillion cubic feet, will probably start flowing in 2011 if developed for the local market, or 2012 if used to supply an LNG project, Farris said.

Woodside Petroleum Ltd., operator of the Pluto LNG venture, has said it is in talks with rival companies for the supply of gas for an expansion of the A$12 billion project.

Apache's four Australian projects will add at least 80,000 barrels of oil equivalent a day of output by the end of 2011, about 14 percent of current production, the company said.

BHP Billiton Ltd. operates the Pyrenees project, while Japan's Inpex Holdings Inc. has a stake in Van Gogh and Kuwait Foreign Petroleum Exploration Co. owns an interest in Julimar.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected]