BG Enters Agreement with Gaz de France for Egyptian LNG

BG Group and its partners have entered a Liquefied Natural Gas Sale and Purchase Agreement for the sale of the entire output of Train 1 of the Egyptian LNG project with Gaz de France. A Participation Agreement, which anticipates Gaz de France becoming a partner in the ELNG project, has also been signed. These agreements mark another significant milestone for the ELNG project and follow three other key developments:

    On September 16, 2002, BG and partners issued the Notice to Proceed under the Engineering, Procurement and Construction contract with Bechtel Corporation for construction of the ELNG plant Train 1 and common facilities, valued at approximately US$900 million;
  • An invitation to lenders to project finance the construction of the ELNG plant Train 1 and common facilities was issued. A preliminary information memorandum was released to international lending institutions on September 16, 2002;
  • On August 1, 2002, Invitations to Tender for the upstream Engineering, Procurement, Installation and Commissioning (EPIC) contract for production of the gas that will supply the plant was issued.

Martin Houston, Executive Vice President, BG Group said: "The Egyptian LNG project is maintaining its aggressive schedule and has attracted strong interest from international and Egyptian banks. With first gas discoveries for the project made in 1999, this will represent one of the fastest liquefied natural gas export plants developed in the industry. Egypt is set to become a significant LNG exporter and derive substantial economic benefit from the Egyptian LNG project."

Bechtel started an early works program on May 1, 2002 and first LNG production is scheduled for the third quarter of 2005. Engineering is well advanced, equipment with long delivery times has been ordered, and site work has started with more than 500 workers preparing the site for civil engineering and construction works.

The ELNG plant, located at Idku, approximately 50 kilometers east of Alexandria, will be a tolling facility and will provide a liquefaction service to BG and its partners in the WDDM Concession - Edison International and EGPC. The Concession partners are the gas sellers under the SPA.

An innovative commercial structure will allow third parties to invest in future LNG production trains at the site. The Idku site has space for up to six LNG trains. The plant will use the Phillips Cascade liquefaction technology and is based on the successful Atlantic LNG plant developed by BG and partners in Trinidad and Tobago.

These agreements represent the formalization of the Heads of Terms LNG sales agreement signed with Gaz de France in January 2002. Under the SPA, Gaz de France will purchase 3.6 million tons of LNG per annum - the full output of Train 1 - for a 20-year period. Under the Participation Agreement, Gaz de France will acquire a five percent ownership in ELNG with BG (35.5 percent), Edison International (35.5 percent), Egyptian Natural Gas Holding Company (EGAS, 12 percent) and Egyptian General Petroleum Company (EGPC, 12 percent). The BG-operated West Delta Deep Marine (WDDM) Concession, offshore the Nile Delta, will supply the gas.

The WDDM gas sellers are marketing the output of the proposed Train 2 to potential buyers in Europe and the USA and expect to finalize a Heads of Terms agreement for the sale of this output by the end of 2002. 8. Statoil Says Kvitebjorn will Operate Cleaner The Kvitebjorn gas field in the Norwegian North Sea will produce without harmful discharges to the sea and with record-low emissions of carbon dioxide. "This reservoir features very high temperature and pressure," observes Kvitebjorn project director Bjarne Bakken. "By exploiting these forces, we can cut energy consumption on the field and thereby substantially reduce emissions to the air and discharges to the sea." Gas production can be piped to land with the aid of reservoir energy because its pressure will be reduced as little as possible during the separation process prior to export.

Similarly, the wellstream temperature will be tapped to process condensate (light oil) and eliminate the need for a separate heat medium in the platform's processing facilities. These measures will keep emissions of nitrogen oxides as low as 0.02 kilograms per cubic meter of gas/oil produced and carbon dioxide released at 16 kilograms per unit produced. That compares with average Norwegian offshore emission ceilings of 0.12 kilograms for nitrogen oxides and 52 kilograms for carbon dioxide set in the official Miljosok environmental study. Produced water and drill cuttings are to be pumped back below ground with the aid of reservoir pressure, eliminating harmful discharges to the sea and reducing emissions to the air. The quality of materials on the Kvitebjorn platform is uniformly high. That enhances safety and cuts maintenance, while the reduced need for corrosion inhibitors also provides an environmental gain.

"Environmental measures adopted on this field are in line with Statoil's objective of producing oil and gas without harmful emissions or discharges," says Mr Bakken. Plans call for Kvitebjorn to come on stream in the autumn of 2004.