BG Group's profits benefit from strong LNG sales

Uchenna Izundu
OGJ International Editor

LONDON, Feb. 10 -- BG Group PLC reported a 25% jump in its fourth quarter earnings to £695 million compared with the same period in 2007 and is confident its business can grow despite the economic downturn.

The company's operating profit for 2008 was £5.4 billion, which is up 65% from a year earlier.

BG plans capital spending of £16 billion in 2009-12 with £4 billion planned for 2009.

Frank Chapman, chief executive officer, said the company has an equipped workforce, strong skills, and the financial strength "to realize the material value inherent in our portfolio, and in so doing achieve a bright and positive future."

LNG portfolio
Global gas prices have dropped but to a lesser extent than international oil benchmarks, BG said. Its LNG division made £1.59 billion as the company succeeded in obtaining long-term contracts before prices plummeted. Contracted supply volumes are 12.6 million tonnes/year to 2020.

In 2009, it expects its LNG profit before interest and tax to be £1.4-1.5 billion and in 2010 £1.2-1.3 billion.

By 2015 BG's LNG production will surpass BP PLC and Total SA to become the world's third largest as it builds operations in Australia and Africa, said Chapman. "BG Group is now a leading LNG player with a footprint of supply to markets across the globe. Our strategy is uniquely built around a highly flexible portfolio," he said.

Other leaders in LNG in 2015 will be ExxonMobil Corp. and Royal Dutch Shell PLC, excluding national oil companies, he added.

Chapman told reporters the company would miss its start up date of 2010 for its Brindisi LNG import terminal in Italy and is evaluating offshore regasification as an alternative.

Chapman stressed that the company was committed to the project, which was originally meant to start imports in 2007, but it has faced protests from local residents who are worried about its environmental effects and safety.

Exploration plans
Exploration success in Brazil with five discoveries in the pre-salt Santos basin boosted the company's proved and probable oil and gas reserves by 64% year-on-year to more than 5.8 billion boe. There have also been exploration successes in Trinidad and Tobago and Norway. It also affirmed its annual production growth target of 6-8% to 2020.

Five exploration wells are planned for 2009 targeting Iguacu, the BG-operated Corcovado, and Sagittario.

Tupi in the Santos basin is estimated to hold a recoverable 5-8 billion boe and is one of the largest discoveries of recent times. Production from an extended well test is expected within the next 12 weeks.

BG has sanctioned Tupi's first phase at $3.7 billion to start first production in late 2010. Its other discoveries, Guara and Iara, are expected to start production in 2012 and 2013 respectively.

In Kazakhstan, gross production last year was 136 million boe from Karachaganak field and its fourth stabilization train will bring export capacity to western markets to 10.3 million tonnes/year in 2010. BG and its partners are analyzing how to best carry out the third phase of the field's development, which will increase production from 100,000 b/d to 125,000 b/d by 2010.

The company has postponed the decline of its UK North Sea assets from 2008 to 2014 by adding net reserves of 300 million boe over the last 5 years. Production has plateaued above 50 million boe/year.

Contact Uchenna Izundu at [email protected].