BG Delivers First Gas from Scarab & Saffron Offshore Egypt

BG Group and its partners have delivered first gas from the Scarab Saffron fields to the Egyptian domestic market on March 29, 2003. The Scarab Saffron development is in the BG-operated West Delta Deep Marine (WDDM) Concession, offshore the Nile Delta, and is a central part of BG's rapidly developing gas business in Egypt.

Scarab Saffron, located 120 kilometers north of Alexandria, is the largest gas field development in Egypt. Situated in deeper water than any previous development in Egypt or the Mediterranean region, it is also the first sub-sea completion in the region, and has one of the longest tie-backs in the world.

Frank Chapman, Chief Executive, BG Group plc, said: "The delivery of first gas from Scarab Saffron is a major milestone for both BG Group and Egypt. We aim to be the premier gas operator in Egypt by 2006 when 40 percent of total domestic production is expected to come from fields we operate. Scarab Saffron is another step forward towards achieving this aim."

The development includes an offshore gathering network consisting of two pipelines - 36-inch and 24-inch - which are capable of supporting both Scarab Saffron and which has sufficient gas to supply two 3.6 million tons per annum (mtpa) trains of Egyptian LNG. Production is expected to reach a rate of 330 million standard cubic feet of gas per day (mmscfd), during a 90-day run-in period. This represents the minimum take or pay level of 75 per cent of the initial Daily Contracted Quantity (DCQ). During the run-in period the plant may be shut down periodically for start-up modifications.

The offshore facilities form the backbone for the development of the Simian Sienna fields for the initial supply of Egyptian LNG Train 1 and the proposed development of the Sapphire field for initial supply of the second train. Train 1 production is scheduled for the third quarter of 2005 with Train 2 due to follow in mid-2006.

Since 1997, BG has drilled 16 exploration and appraisal wells in the WDDM Concession, realizing a 100 percent success rate. In 1999, a Gas Sales Agreement (GSA) was signed with the Egyptian General Petroleum Corporation (EGPC) for the sale of gas into the domestic market. In December 2002 an agreement was signed to increase the DCQ set out in the GSA.

Under the amended GSA, the initial DCQ of 440 mmscfd rises in stages to a maximum of 633 mmscfd, three months after the first shipment of liquefied natural gas (LNG) from Egyptian LNG Train 1.

The Saurus, Serpent and Sequoia fields are intended to be developed at a later stage to supplement supplies to the first two LNG trains.

BG Group has a 50 percent working interest in West Delta Deep Marine Concession and Edison International holds the remaining 50 per cent. The partners were awarded the concession in 1995.

Burullus Gas Company, a joint venture company, formed by BG, Edison and EGPC, undertakes exploration, field development and operations on behalf of the WDDM concession holders.

The Scarab Saffron development consists of eight sub-sea wells, located in a water depth of about 700 meters, tied into a pipeline end manifold that is in turn tied back to an onshore terminal by two gas pipelines. Additional pipeline capacity has been installed to allow subsequent field developments to tie into the Scarab Saffron facilities. Field operations are controlled from the onshore terminal via electrical and hydraulic umbilical lines.

Under the amended GSA the DCQ rates are
Up until the end of 2003 440 mmscfd
From January 1, 2004 586 mmscfd
From January 1, 2005 626 mmscfd
From January 1, 2006 533 mmscfd

A further rise of 100 mmscfd is intended to take effect three months after the first shipment from Egyptian LNG occurs and this DCQ will stay in place for seven years.

In April 2001, BG and Edison signed a fully termed agreement with EGPC setting the commercial foundation for Egyptian LNG making the partners the first and currently only upstream players in Egypt with a definitive export agreement allowing the export of gas from a development within a concession area. Train 1 construction is under way and project financing has been mandated. An early works program for Train 2 consisting of detailed engineering, procurement of long lead-time items and site preparation work began in December 2002.