BG: Growing ambitions

31 March 2006
It was a stellar year for international oil companies (IOCs) in 2005, and the UK's BG Group was no exception. Soaring energy prices, underpinned by robust global demand, saw its operating profits increase by 57 per cent to£2,380 million ($4,132 million). The energy giant, whose international portfolio includes operations in Egypt, Gaza, Libya, Tunisia and Mauritania, enjoyed strong returns on both its exploration and production (E&P) and liquefied natural gas (LNG) activities, and is set to accelerate investment in the next five years.

Last year, BG acquired more than 45,000 square kilometres of gross new acreage, and saw E&P operating profit increase by 63 per cent to £1,942 million ($3,372 million). LNG operating profit almost doubled to £172 million ($299 million) from £92 million ($160 million), and supply is set to grow at a compound annual rate of 28 per cent to 2009. The firm's shipping and marketing operations will deliver 12.9 million tonnes of LNG in 2006, rising to 16.7 million tonnes in 2009.

Important region

Active across five continents, a key component of the company's growth strategy is its operations in North Africa. The poles of its regional activity are Egypt and Tunisia. Egypt is a core element in the company's LNG portfolio. Egyptian LNG (ELNG), a consortium of BG and Malaysia's Petronas, brought on stream its first, 3.6 m illion-tonne-a-year (t/y) train, ELNG 1, last May, and the first cargo was lifted on the 3.5 million-t/y ELNG 2 train in September, nine months ahead of schedule. Debottlenecking of the two trains over the next three years is set to increase production by five-10 per cent, and plans are now on the table for the development of a third train with capacity of 3.5 million t/y, which the company hopes to bring on stream in 2011-12.

'We plan to source the gas from a combination of BG assets, other players and also maybe from Gaza,' says BG chief executive officer Frank Chapman. Offtake agreements for the LNG have not been signed for the third train, but Chapman is not concerned by this. 'We can easily absorb the 3.5 million t/y that train 3 will produce, and are quite happy to do so.'

The company intends to source some of the feedstock for the third train from its fields in offshore Gaza, in which it holds a 90 per cent operating interest alongside Athens-based Consolidated Contractors International Company. 'From our point of view, the most economical use for the Gaza gas is to pipe it to Egypt to feed the third Idku train,' says BG chairman Robert Wilson. 'Some gas can be used to power local electricity generation, replacing the expensive gas feed, and the balance can be exported. Obviously, this is not just our decision - there will be a number of political considerations. The previous [Palestinian] administration was positive about the idea, but we will have to see what the Hamas government has to say.'

A supplier of gas to Tunisia for 10 years from its Miskar field in the Gulf of Gabes, BG has invested about $1,000 million in the country and meets about 50 per cent of its energy needs. Miskar saw record production in 2005, and negotiations with Tunis are now in the final stages for the development of the Hasdrubal field, where BG made a significant discovery in 2005. The field, in which the firm will hold a 50 per cent equity stake, has estimated gross proven and probable reserves of 78 million barrels of oil equivalent (boe), and is due to produce about 30,000 boe a day when it comes on stream in 2009.

'Tunisia is an important component of our global portfolio, and ideally we would like to spend another $1,000 million in the next five-six years,' Derek Fisher, CEO of BG Tunisia, told MEED in late 2005.

Elsewhere in North Africa, oil production began in late February at the offshore Chinguetti field in Mauritania, where BG holds a 10 per cent in

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