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BG Group: Outlook for Global Gas and LNG Demand is Strong

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BG Group outlined its annual strategy Thursday as its released results for the fourth quarter as well as for the whole of 2011.  

BG Group's Chief Executive Sir Frank Chapman said: "The outlook for global gas and LNG demand is strong. BG Group is well set to capitalize on these opportunities and is making good progress with delivering its plans."
 
Outlining some key elements to Thursday's presentation, Sir Frank continued, "not only is our LNG supply set to exceed our 2015 target of 20 million tonnes per annum (mtpa), but we believe that a BG Group supply portfolio of 30 mtpa by 2020 is now within reach. The near-term picture is also very positive and we are raising our LNG profit guidance for 2012 by over 30 percent to between $2.6 and $2.8 billion. Our LNG business is set fair with the prospect of excellent profit momentum for many years."
 
Sir Frank added, "in exploration, independent analysis continues to show BG Group as one of the industry's leading explorers over the last decade. In 2011, exploration and appraisal activity added another billion barrels of oil equivalent (boe) to our resource base. We made discoveries in Norway, Tanzania, and the UK, and our reserves and resources now stand at 17.1 Bboe - that's 73 years production at 2011 levels. In 2012, we'll invest $1.5 billion in our exploration program, targeting prospects in seven countries including new frontier plays in Australia, Egypt and Tanzania."
 
On production, Sir Frank gave an outlook on expectations saying, "In 2012, our base assets will continue to make a material contribution bolstered by new production due on-stream in Bolivia, Egypt, Norway, Thailand and the UK. In terms of production for this year, we start the year with a production run rate of some 650 000 boe per day (boepd) and we expect to exit the year with a rate of some 750 000. Key factors will be improved production from the UK, alongside six new projects coming onstream progressively through the year."
 
Sir Frank continued, "combining our solid base with the contributions from Australia and Brazil is expected to deliver production of more than one million boepd by 2015 and around 1.4 million boepd by 2020 – a production profile, underpinned by already discovered resources and named projects, which will deliver the mid-point of our long term 6-8 percent growth range established in 2005. Further, we expect risked resources from our exploration portfolio to allow the top end of the range also to be achieved in 2020."
 
Sir Frank also highlighted the progress being made on key projects adding, "In Brazil, we upgraded our estimates on Santos Basin resources to some 6 billion boe net to BG Group with an upside potential of 8 billion boe net. Drilling performance has continued to improve, results from the first permanent FPSO and from other extended wells tests have exceeded our expectations, and we now expect production, from the big five Santos Basin fields, to be over 600 000 boepd net to BG Group by 2020." 
 
In line with this, he added, "the proximity and similarity of these fields allows a flexible modular development approach and the sharing of infrastructure, a combination that yields exceptional capital efficiency and robust economics. Moreover, unit costs are competitive and falling."
 
"In Australia, we made significant progress on the Queensland Curtis LNG project - a project underpinned by 10 mtpa of LNG sales already secured to high-value Asia-Pacific markets and a resource base that has increased five-fold from around 5 trillion cubic feet (tcf) in 2008 to more than 25 tcf today."
 
On funding and investment plans Sir Frank said, "in actively supporting and managing the progress of our growth program, we raised $5.6 billion from the bond markets last year, increased our undrawn committed facilities to $4.5 billion and signed a memorandum of understanding with the Bank of China for up to $1.5 billion of potential funding support. In addition to this, we are planning to release some $5 billion over the next one to two years with the continuing execution of our portfolio rationalization program. Over 2012-13, capital expenditure – on a cash basis – is expected to be $22 billion with non-cash items amounting to $2.3 billion."
 
Sir Frank concluded his remarks stating that, "our proven and distinct capabilities – grounded in market knowledge, commercial agility, exploration performance and fast-track project development – position us to realize the opportunities within our growth portfolio. We are well set to continue the trend of value creation based on already discovered resources and named projects".

Key portfolio developments

Brazil
  • Gross production from BG Group's interests in the Santos Basin has already reached some 30 million boe.
  • BG Group is on track to deliver gross installed capacity of 2.3 million boepd by 2017.
  • The first permanent FPSO on the Lula field - currently connected to three wells - has produced some 15 million boe in total to date. A fourth production well is planned for connection in 2012. From this location alone, BG Group expects that one billion boe will be produced through the life of the Lula field.
  • Drilling performance has consistently improved. Time to reach total depth is down from 141 days taken on the Lula discovery well, to an average now of 66 days.
  • At the BrasFELS shipyard, significant progress is being made on FPSO 2. Already some 80-percent complete, with a total capacity of 150,000 boepd, she will operate on the Sapinhoá field from 2013. The work on FPSO 3, due onstream on the Lula field in 2013, is over 70-percent complete and the vessel is preparing to leave Singapore for Brazil. Contracts have been awarded for FPSOs 4 and 5.
  • A further eight FPSO hulls are being built at the Rio Grande do Sul yard with welding on the hull for FPSO 6 underway.
  • Over 40 percent of this program has been contracted, including all the FPSO hulls, at costs in line with international benchmarks.
  • BG Group's independent oil sales operations from the Lula FPSO have begun. Two cargoes were lifted last year, aboard the one million barrel capacity Windsor Knutsen shuttle tanker, and a further seven cargoes are planned for 2012.
  • Commercial gas sales have also commenced via the Lula-Mexilhao pipeline - the pipeline has sufficient capacity for three FPSOs. The Cabiunas gas pipeline is due to be sanctioned in 2012 and will have sufficient gas export capacity for a further three to four FPSOs.
Australia
  • The initial two-train, 8.5 mtpa plant remains on track for first LNG in 2014.
  • From mid-2012, 11 rigs will be operating with a peak target of 40-50 wells per month. To date, over 700 wells have been drilled.
  • All 335 miles (540 kilometers) of pipeline network is in country and nearly 93 miles (150 kilometers) is already in position and strung out along the route. Welding of the pipeline is underway, increasing to a rate of 1.5 miles (2.5 kilometers) per day during the year.

US

  • BG Group moved quickly to establish a US LNG export business, capturing the opportunities presented by the large low-cost shale gas resource.
  • BG Group signed a landmark deal with Cheniere which will add 5.5 mtpa in new LNG volumes, from the Sabine Pass facility, over the period 2015-18. Additionally, LNG export development plans are in place for the Lake Charles facility. A 15 mtpa export authorization is already secured for Free Trade Agreement (FTA) countries; a decision on BG Group's application for non-FTA countries is expected by the end of 2012.
  • In the upstream, BG Group expects its US rig count to fall from 35 to around eight in 2012 in response to the current low gas price. Accordingly, forward plans now anticipate around 80,000 boepd net production from US shale gas in 2015.
Tanzania
  • BG Group assumed operatorship of three blocks, offshore Tanzania, covering over 7,720 square miles (20,000 square kilometers).
  • The first drilling campaign yielded three gas discoveries in high quality reservoirs, with estimated resources of over 3 tcf.
  • A further three to four exploration wells will be drilled across these blocks in 2012 as BG Group continues to assess multi-tcf prospects in the region.
  • Screening work has begun to identify a potential site for an onshore LNG export facility.

WHAT DO YOU THINK?

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