BG plc subsidiary, BG Exploration and Production Ltd, has today signed production sharing agreements paving the way for the undertaking of two major ventures in Kazakhstan.

The agreements for development of the giant Karachaganak oil and gas field in western Kazakhstan and, in a different partnership, for exploration rights for the Kazakh sector of the Caspian were signed in Washington. US Vice President Al Gore and Kazakh President His Excellency Nursultan Nazerbayev attended the signing.

David Varney, BG plc Chief Executive, who signed the agreements on behalf of the company, said: "These agreements represent an important step forward for BG. The Karachaganak agreement gives BG a leading role in one of the world's largest oil and gas fields - substantially larger than any North Sea discovery.

"The Caspian agreement gives BG a key position in one of the most exciting exploration plays available to international oil and gas companies."

Frank Chapman, BG plc Executive Director for Exploration and Production, said:

"Karachaganak is a major development and an important part of our plans announced earlier this year for increasing our production from 150,000 to 400,000 barrels of oil equivalent per day over the next five years. We anticipate that Karachaganak will represent around 10 per cent of BG's asset value outside of Transco in the year 2000.

"We have been operating the field, with Agip, for two and a half years and have developed a good working knowledge of the field and the region.

"Achieving these agreements has been one of BG's key goals for this year, demonstrating our ability to manage complexity and get results in partnership with leading international companies."

Karachaganak

The 40-year production sharing agreement with the Kazakh government, signed today, gives the go-ahead to the development of the field in western Kazakhstan, which has recoverable reserves of 2.4 billion barrels of oil and 16 trillion cubic feet of gas.

The planned production by 2001 amounts to approximately 170,000 barrels of oil per day and five hundred million cubic feet of gas per day.

BG's share of the development costs of the field following the PSA is around £400 million. Further phases of the development still to be detailed envisage production levels up to 260,000 barrels of oil per day and 1.4 billion cubic feet of gas per day.

BG Exploration and Production and Agip - the exploration and production company of Italy's ENI - will continue to be the joint operators of the field. Partner interests are: BG E&P 32.5%, Agip 32.5%, Texaco 20% and Lukoil of Russia - who have replaced Gazprom in the consortium - 15%.

The production sharing agreement, which is subject to formal Kazakh government approvals, governs the full development of the field and puts in place long term transportation and processing agreements for the gas and liquids.

The completion in May 1997 of the agreement to build a new Caspian pipeline, which provides Karachaganak with a route to reach international markets, was a catalyst for accelerating today's agreement.

As shareholders in the Caspian Pipeline Consortium, BG and Agip will each be entitled to an initial three million tonnes per year of capacity in the pipeline, which they will use to transport oil from Karachaganak to the Black Sea at Novorissiysk.

Caspian Consortium

BG Exploration and Production Ltd - and six other international exploration and production companies, Agip, British Petroleum/Statoil, Mobil, Shell and TOTAL, together with the Kazakh state entity, KazakhstanCaspishelf (KCS) - also signed today a further major oil and gas agreement with the Republic of Kazakhstan.

The agreement grants the participating companies the rights to acreage in the offshore area of the North Caspian on the basis of a Production Sharing Agreement (PSA). Under the PSA, several exploration wells will be drilled and a limited amount of additional seismic data will be acquired. The acreage covers approximately 6,000 square kilometres of the North Caspian.

This agreement confirms and further details the rights granted under a previous agreement signed by the PSA participants in December 1993 under which the foreign companies agreed to fund an extensive seismic survey of the Kazakh offshore. In March, the consortium completed more than 26,000 kilometres of high quality two-dimensional seismic investigation.

Today's PSA signing provides the basis for moving on to the exploration drilling phase and eventual development and production of any commercial discoveries.

While the recently completed seismic survey and giant nearby onshore discoveries such as Tengiz indicate the potential to discover oil offshore, no wells have yet been drilled in the North Caspian. The first is planned for 1998.

Notes to Editors

The Karachaganak field was discovered in 1979 and partially developed until the break-up of the Soviet Union in 1991. In order to stimulate the full development of the field, the Kazakh authorities carried out a competitive process and, in 1992, awarded BG and Agip the exclusive rights to negotiate to develop the Karachaganak field.

In the absence of secure, long-term transportation arrangements for liquids to access hard currency markets, it was not possible to conclude negotiations on a Production Sharing Agreement.

In 1995, a Production Sharing Principles Agreement (PSPA) was signed to allow work in the field to improve safety and arrest decline of production capacity and further deterioration of the facilities. At the time of signing the PSPA, Gazprom joined the Contractor Group with 15% equity.

Under the PSPA, the production capacity of the field has been considerably increased to an annual level of 25 million barrels of oil and condensate, and 190 billion cubic feet of gas.

Expenditure incurred under the PSPA was fully recoverable by the Contractor Group.

Earlier this year, BG and Agip each farmed out a 10% interest to Texaco.

BG E&P is involved in gas and oil exploration and production in UK offshore waters and worldwide. E&P is amongst the six largest holders of hydrocarbon reserves in the UK. Overseas E&P is exploring in South America, Europe, Africa and Asia, and has oil and gas production interests in Egypt, Italy, Qatar, Russia, Thailand, Trinidad and Tunisia.