First Gas Flows From BG's Southern Cross Pipeline

BG Group reports that first gas arrived in Montevideo through the $160 million Gasoducto Cruz del Sur (Southern Cross Pipeline or GCDS), allowing Argentine gas to flow into Uruguay beneath the River Plate. The pipeline will be inaugurated by President Jorge Batlle of Uruguay later this month.

The BG-operated Southern Cross pipeline operates under a 30-year Concession Agreement awarded by the Government of Uruguay in March 1999. BG is a 40% shareholder, and the other partners are Pan American Energy (30%), ANCAP - the Uruguayan state hydrocarbon company - (20%) and Wintershall (10%).

Speaking today, BG Executive Vice President for South America Rick Waddell said: "The completion of the Southern Cross pipeline marks a major achievement for BG and its partners in South America. As well as fulfilling a key economic need for the markets of Montevideo, the pipeline is a remarkable new example of cross-border infrastructure projects. BG has been proud to play a central role in helping realize this key example of regional integration between Mercosur countries."

The main customer for Argentine natural gas in Uruguay will be UTE (the state electricity utility), which will burn gas in its Montevideo-based power plant. Gazeba, the capital's local distribution company, and CONECTA, the distribution company for the rest of the country, are also expected to become a customer, thereby reducing their current dependence on manufactured gas and LPG. UTE has entered into a long term gas sales agreement with Pan American/Wintershall for gas to be supplied from their Argentine reserves.

The Southern Cross pipeline Concession covers a possible extension from Uruguay to the Brazilian border, in order to supply possible markets in Southern Brazil. A number of marketing and technical studies have been completed, but are on hold pending greater marketing definition and development.