Agreements were signed yesterday by a BG/Pan American Energy consortium and the Government of Uruguay, giving the green light for construction to begin on the 215 km natural gas pipeline from Buenos Aires, Argentina to Montevideo, Uruguay.

Following an international bid for the 30 year, gas transportation concession, the Uruguayan Government confirmed in June 1998 that BG and its partners Pan American Energy LLC and the Uruguayan state energy company ANCAP, had been successful and were invited to develop this US$ 135 million project. The three partners have a formed a company, Gasoducto Cruz del Sur SA., to develop the project.

The pipeline system will initially transport up to six million cubic metres of natural gas a day (mmcmd) across the River Plate, from reserves in Argentina to markets in Uruguay. Subsequently, it will be expanded to deliver approximately 15 mmcmd to southern Brazil. Construction work is expected to begin in April 1999, following the completion of detail design. The pipeline is expected to be delivering gas for residential, industrial and commercial consumers and power plants by April 2000.

BG plc Executive Director responsible for International Downstream, Stephen Brandon said: "This project is an important step in the integration of the energy network of three major Mercosur countries. It will help attract new industries and thermo-electric power generating plants to the southern region of Brazil's Rio Grande do Sul State, as well as to Uruguay."

Pan American Energy Chairman of the Board, Ing. Alejandro Bulgheroni said: "Gasoducto Cruz del Sur is a milestone for sustainablebusiness in the Mercosur. This project opens excellent possibilities to develop a new market committed to the use of the environmentally friendly source of energy that is natural gas."

The consortium has awarded the offshore construction contract to a consortium formed by Jan de Nul of Belgium and Saibos (a joint venture company formed by Saipem and Bouygues Offshore). The contractor for onshore works will be announced in the next few weeks. BG will be technical operator of the pipeline.

Engineering and environmental studies for extending the pipeline from the River Plate crossing for a further 920 kms to Porto Alegre in southern Brazil will be complete in March 1999. Construction of the extension to Brazil is planned to begin following authorisation from the Brazilian Agencia Nacional do Petroleo. The consortium is currently agreeing the basis for the project extension with the Brazilian authorities and several prospective key customers.

ANCAP President, Economist Eduardo Ache said: "This project will introduce a major change in the energy matrix in Uruguay, because it provides a new low polluting source of energy. This pipeline is a milestone in the country's economic development".

Notes to Editors

The BG/Pan American Energy consortium was chosen to build and operate the pipeline, following the submission of the lowest tariff proposal in March 1998. The bid was successful against international competition.

The Argentina-Uruguay pipeline will involve an investment by the partners of around US$135 million over two years. BG and Pan American will each have a 40 per cent interest, with ANCAP to hold the remaining 20 per cent. The second stage will bring the total investment up to almost US$ 500 million, much of which will be raised through project financing.

The Argentina-Uruguay pipeline will add to BG's role as leading shareholder and operator in MetroGas - the gas distribution company supplying 1.9 million customers in

Buenos Aires - and to its position as a shareholder in the major pipeline bringing Bolivian gas to south-eastern Brazil. BG is also involved in developing power generation projects in Brazil and holds an interest in a significant recent gas discovery in Bolivia.