BG Group plc today announced the signing of an agreement marking a major step forward for the development of an integrated liquefied natural gas (LNG) export project in Egypt.

The project would involve the combined development of discovered uncontracted gas reserves offshore in the West Delta Deep Marine (WDDM) Concession and the construction of a US$900 million onshore liquefaction plant at Idku on the Mediterranean coast, east of Alexandria.

The agreement signed by the Egyptian General Petroleum Corporation (EGPC), BG and Edison of Italy includes proposed amendments to the existing West Delta Deep Marine Concession Agreement and puts in place the commercial framework for the development of Egypt's first LNG export project. The amendments to the Concession Agreement are subject to ratification by the Egyptian People's Assembly.

Negotiations are progressing with key potential customers, which will now be stepped-up in close co-operation with EGPC and Edison.

It is anticipated that project sanction will follow completion of the front-end engineering design studies and the conclusion of an LNG sales agreement for the first train.

Frank Chapman, Chief Executive of BG Group said:

"The signing of this fully termed agreement concludes the LNG negotiations with EGPC and sets the commercial foundation for the development of Egyptian LNG. It clears the path for EGPC, BG and Edison, working in close co-operation, to step up our joint marketing campaign with the credibility and firm commercial undertakings that this definitive agreement establishes."

Peter Dranfield, President of BG Egypt added:

"In recent years BG has been far-and-away the most successful explorer in Egypt, with 16 successes out of 17 wells drilled by BG and discoveries since 1997 totaling more than 10 trillion cubic feet of gas. Our project has the backing of very substantial uncommitted gas reserves. In addition, we have extensive prospectivity remaining in our licences."

BG and Edison have been advancing their plans for Egyptian LNG in step with the exploration success in the WDDM concession. The status of other aspects of the LNG project is:

BG and Edison have a strong uncontracted and certifiable reserves position in WDDM. The Scarab and Saffron fields are currently being developed for the domestic market and the associated Simian, Sapphire, Sienna and Serpent discoveries would support the LNG scheme.

As part of the integrated development of the WDDM concession, larger offshore pipelines are being installed sufficient to support a two-train LNG development, in addition to supplies to the domestic market from the Scarab/Saffron fields. This strategic pre-investment should ensure the cost competitiveness of the scheme.

The LNG liquefaction plant would be located at Idku, 50 kilometers east of Alexandria, adjacent to the Rosetta and Scarab/Saffron gas processing terminals. Together these facilities would form a major new Egyptian gas hub - The Idku Hub - with its own port facilities.

Bechtel Inc. of the USA is the Deepwater Managing Contractor on the Scarab/Saffron development and has been involved in the early definition and engineering work for the LNG plant. It is planned that the plant would use the Phillips Optimized Cascade Process, which was successfully applied at Atlantic LNG in Trinidad and constructed by Bechtel. It is hoped to repeat this success at the Idku plant.

BG has established a key position in LNG shipping with uncommitted LNG carriers under contract to support Atlantic and other LNG plants.

Notes to Editors

BG Group, the international exploration and gas supply business, has been active in Egypt since 1989 and, having achieved major growth and diversification, has significant activities throughout the gas business. These include developing the Rosetta and Scarab/Saffron gas fields, and being the lead participant in the company developing the gas market and pipeline infrastructure in Upper Egypt.

BG Group along with its partners has now established itself as one of the world's lowest cost LNG manufacturers in the Atlantic LNG plant in Trinidad & Tobago.

It is a 26 per cent shareholder in the Atlantic LNG Company that produces three million tonnes of LNG per annum for markets in Spain, Puerto Rico and the US. A further two trains are under construction to triple production to over nine million tonnes a year, commencing in 2002 (Train 2) and 2003 (Train 3).

In Indonesia, BG's reserves from exploration interests are targeted for the proposed Tangguh LNG project for both the traditional markets in Japan, Korea and Taiwan and emerging markets in the region.

The Egyptian General Petroleum Corporation (EGPC) is the State Corporation that implements plans and oversees policies relating to oil and gas operations in Egypt. EGPC co-ordinates these activities through its participation in companies involved in exploration, production, refining, processing, petrochemicals, distribution and transportation.

Edison International is BG's partner in the Rosetta and WDDM Concessions and, together with other local partners, in the gas transportation and distribution business through the Nile Valley Gas Company. Edison, controlled by Montedison, is Italy's leading private energy group.