BG Signs Sales Agreements for Second Train of Egyptian LNG

BG Group and its Egyptian LNG (ELNG) Train 2 partners have signed the full Sale and Purchase Agreements (SPAs) for the sale of the entire 3.6 million tons per annum (mtpa) output of ELNG Train 2 to BG Gas Marketing Limited, a subsidiary of BG Group. Signature of the final agreements follows the agreement of principal terms on 2 July 2003.

The US$550 million ELNG Train 2 is scheduled to start commercial operations in 2006. The LNG to be purchased by BG Gas Marketing is intended to be supplied to BG LNG Services for the Lake Charles LNG import terminal in Louisiana, USA. This SPA will initially cover the entire output of ELNG Train 2 but provides for volumes to be switched to the proposed LNG import terminal at Brindisi in Italy, which is being developed by BG Group and ENEL.

Supply of LNG to the Brindisi Terminal will be governed by a separate SPA which was also signed today. This supply arrangement is expected to begin approximately one year after Train 2 commercial operations start.

Jon Wormley, Executive Vice President and Managing Director, Europe and Mediterranean Region, said: "Finalization of the Sale and Purchase Agreements marks the completion of the commercial framework for ELNG Train 2. This has occurred in parallel with actual construction work on Train 2 and the development of the upstream facilities that will supply the gas. The result is that ELNG Train 2 maintains its aggressive schedule."

The Sapphire field in the BG-operated West Delta Deep Marine (WDDM) Concession, offshore the Nile Delta, is being developed to supply the gas for Train 2. Award of the engineering, procurement, installation and commissioning (EPIC) contract for the development of the Sapphire field was made in July 2003 to Technip Offshore UK.

The ELNG Train 1 plant and common facilities, located at Idku, 50 kilometers east of Alexandria, are under construction.

The BG-operated Simian Sienna fields in the WDDM Concession will supply the gas for Train 1. In May 2003, the EPIC contract for the development of Simian Sienna was awarded to Technip Offshore UK. The Simian Sienna and Sapphire developments will tie into the gas gathering network developed for the Scarab Saffron fields in the WDDM, which started production in March 2003 and are currently producing at around 400 million standard cubic feet per day.

The first train is designed to produce 3.6 mtpa of LNG and will use the Phillips Optimised Cascade liquefaction technology. Train 2, development of which is well under way, will also use the same liquefaction technology. The site can accommodate six LNG trains and a multiple company structure has been adopted by the sponsors to give maximum flexibility for future expansion. It is also designed to allow other gas producers in Egypt to invest in future LNG export trains without having to replicate supporting infrastructure and is intended to make future expansions of ELNG easier to project finance.

A LNG Sale and Purchase Agreement was signed in October 2002 for the sale of the entire output of the first train to Gaz de France, the Heads of Terms having being announced in the January of that year. Train 1 is scheduled to start production in the second half of 2005. BG and its partners have also made progress securing project finance for the construction of Train 1 and common facilities with the announcement in January 2003 of the appointment of 12 international banks as International Mandated Lead Arrangers, and the signing of an agreement with three Egyptian banks.

The Egyptian LNG Holding Company will own both the ELNG site and common facilities, such as storage tanks and jetty. An operating company will undertake the operations of all trains, although separate companies will own the individual trains.