BG Group Sells Remaining North Caspian Interest to Sinopec

Following the announcement on 7 March, that BG Group is to sell half of its interest in the North Caspian Sea Production Sharing Agreement to CNOOC North Caspian Sea Ltd, BG has now agreed to sell its remaining interest in the PSA to Sinopec International Petroleum Exploration and Production Corp. (a wholly owned subsidiary of China Petrochemical Corporation ("Sinopec Group.") of China) for a cash consideration of $615 million, payable at completion.

Under the agreement, Sinopec will acquire BG's remaining one twelfth (8.33%) interest in the PSA. Completion of the transaction is subject to a number of conditions, including approvals from the Kazakhstan and Chinese authorities and the existing PSA partners waiving pre-emption rights.

The North Caspian Sea PSA includes the Kashagan oil field, the Kalamkas oil discovery and the Kairan, Aktote and Kashagan SW prospects, and is operated by ENI, which holds a 16.67% interest. The other partners are ExxonMobil, Shell and TotalFinaElf, each with 16.67% interest, and ConocoPhillips and INPEX, each with 8.33%.

Speaking today, BG Chief Executive Frank Chapman said:

"We are delighted to have reached this agreement with Sinopec, which completes the divestment of our interest in the North Caspian PSA. It demonstrates the significant value that BG and its partners have created in the North Caspian and will enable us to maintain our focus on gas. BG remains strongly committed to Kazakhstan through retention of our key interests in the giant gas condensate field at Karachaganak and in the Caspian Pipeline Consortium."

BG continues to focus on high growth and good returns, and the proceeds of this disposal will allow BG to consider accelerating or enhancing projects within its existing portfolio, or adding new opportunities as it continues to grow. BG remains committed to the disciplined use of capital and if appropriate, will consider returning surplus capital to shareholders after addressing the attractive opportunities expected to be available.

The economic effective date of the transaction is January 1, 2003, at which date the net asset value of the interest to be sold was £114 million. The sale is expected to complete during the course of 2003. The North Caspian Sea PSA has yet to commence production, and therefore did not contribute to BG's 2001 or 2002 profits.

The North Caspian Sea PSA covers 5,600 square kilometers of the Kazakhstan section of the Caspian Sea. The drilling of the first well, Kashagan East-1, commenced in 1999 and, in June 2000, the partners announced the Kashagan discovery. This was followed by the Kashagan West-1 well, which was also successful. An appraisal program comprising a 3-D seismic survey over the whole of the Kashagan structure and five appraisal wells is well advanced. Two wells, KE-2 and KE-3, have been successfully completed, two further wells, KE-4 and KE-5, are nearing completion, and the fifth, KE-6, will spud in the spring. Front End Engineering Design for Kashagan development is under way. The consortium has also drilled the Kalamkas exploration well, announced as a discovery in October 2002. Three further exploration prospects within the license area are due to be drilled during 2003.