BG to Spend $1B on Egypt Gas, Grow Domestic Supply

CAIRO, Jun 4, 2007 (Dow Jones Newswires)

BG Group PLC (BG.LN) will invest $1 billion in upstream projects in Egypt to help meet surging domestic gas demand in the Arab world's most populace state, a company executive told Dow Jones Newswires Sunday.

The investments will focus on producing more gas from West Delta Deep and the Rosetta concessions in Egypt's Nile Delta, said Ian Hewitt, President of BG Egypt.

"We are discussing those with our partners and we are making sure that our economics works and our returns are right," he said.

Concerns over the rapid rise in Egypt's gas consumption prompted the government to introduce legislation two years ago limiting to 25% the quantity of the country's 58.5 trillion cubic feet of reserves that can be made available for export.

Securing adequate gas supplies is crucial for continued economic growth in Egypt, where the population of more than 80 million people is growing at an annual rate of almost 2%, according to the U.S. government.

U.K., Reading-based BG produces 2.6 billion cubic feet a day of natural gas in Egypt, equal to more than 40% of the country's gas supply.

Development of the offshore Nile Delta areas will involve sub-sea projects to add new gas wells to West Delta Deep Marine and Rosetta, which will also require additional gas compression facilities, said Hewitt.

BG, the U.K.'s third-largest oil and gas company, plans additional exploration work to find new gas resources in El Manzala, El Burg and the North Sidi Kerir Deep Offshore, he said.

"During the last 12 months we have shot new seismic for all these blocks and we will be spudding a well in El Manzala by the end of this year and we will likely follow that up with one in El Burg next year and we will make a decision about North Sidi Kerir later this year," Hewitt said.

Liquefied natural gas, or LNG, will continue to play a major role in BG's Egyptian business with the company planning a third production plant at its Idku facility by 2011, he said.

"A third train at Idku would probably materialize by 2011 or 2012," he added.

The company holds a major stake in Egyptian LNG, or ELNG, located at Idku on the Mediterranean Sea. The facility has two trains producing 7.2 million tons a year of liquefied natural gas for export.

A third-train with the same size and capacity as the first two would require 4 trillion cubic feet of gas in order to materialize, part of which could be supplied through BG's Gaza Strip Offshore concession that has 1 trillion cubic feet of reserves, Hewitt said.

"There are a number of third party suppliers that are interested in exporting their gas via Idku and we have had a number of discussions about doing that" in case the Gaza gas isn't available, Hewitt said.

Egypt has two LNG projects, one in Idku and the other in Damietta. Spain's Union Fenosa SA (UNF.MC) and Italy's Eni SpA (E) are major shareholders in the Damietta plant, while BG has a major stake in the Idku project alongside Malaysia's Petronas.

Copyright (c) 2007 Dow Jones & Company, Inc.

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