BG Gas Marketing & Equatorial Guinea LNG Ink LNG Supply Deal

BG Gas Marketing Ltd (BGML), a wholly-owned subsidiary of BG Group plc, has signed a long-term agreement with Equatorial Guinea LNG Holdings Limited (EGLNG) to purchase liquefied natural gas (LNG). BGML announced on May 13, 2003 that it had signed a Letter of Understanding in relation to this supply.

The agreement provides for the supply of 3.4 million tonnes per annum of LNG for a period of 17 years, beginning in late 2007, from the LNG liquefaction plant being developed by EGLNG on Bioko Island, Equatorial Guinea. An Early Works Programme of construction has already begun and the plant is expected to be on-stream in 2007. Feedstock gas for the project will be sourced primarily from the Marathon-operated offshore Alba Field.

Martin Houston, Executive Vice President and Managing Director, North America, Caribbean and Global LNG, said: "This agreement represents an important step in building our portfolio of long-term competitively priced LNG. The USA will be the principal market for this LNG, but the agreement provides us with flexibility on the destination of the LNG, enabling BG Group to take advantage of favourable conditions in other markets."

EGLNG is jointly owned by subsidiaries of Marathon Oil Corporation and Compañía Nacional de Petróleos de Guinea Ecuatorial (GEPetrol).

BG LNG Services, LLC (BGLS), a wholly owned subsidiary of BG Group, has rights over 100% of the capacity at North America's largest operating LNG import terminal, Lake Charles in Louisiana, which has the capability to receive, store, vaporise and deliver an average send-out of 630 million standard cubic feet per day (mmscfd). In March 2003, the Federal Energy Regulatory Commission (FERC) gave approval for expansion of the terminal to 1.2 billion cubic feet per day (bcfd). This first phase expansion is expected to commence operations at the beginning of 2006. On 2 February 2004, BGLS reached agreement with Trunkline LNG and Trunkline Gas for a further expansion, which will result in an increase of terminal send-out to 1.8 bcfd from the middle of 2006. This second phase expansion is subject to approval of FERC.

BGLS, in conjunction with Keyspan, is also seeking to develop and upgrade an LNG terminal at Providence, Rhode Island. If successful, this may be the first import terminal to open in the USA for several years.

In December 2003, BGLS and BGML completed an agreement with El Paso Merchant Energy (EPME) to acquire all of EPME's capacity in the Elba Island LNG regasification terminal near Savannah in Georgia and related LNG purchase and gas sale agreements. Through a services agreement with the terminal owner, Southern LNG Inc, BGLS will, from January 1, 2004 to December 1, 2023, hold firm capacity rights at the terminal of 446 mmscfd.