Gujarat Gas Company Limited, in which BG Group plc is the majority shareholder, has agreed with Cairn Energy plc and partners to buy natural gas from the Lakshmi field, in the Gulf of Cambay, offshore west India.

The contract, for 1.27 million cubic metres a day (mcmd) for five years, is due to begin by July 1, 2002.

The CB-OS/2 block in the Lakshmi field, which will supply the gas, is ideally placed on the west coast of Gujarat State to feed Gujarat Gas's approximate 130,000 customer base. This gas supply will enable Gujarat Gas to extend its 1,500 kilometres pipeline system into the industrial cities of Ahmedabad and Vadodara in central Gujarat, subject to Government approval.

Frank Chapman, Chief Executive, BG Group plc, said: "BG Group, through its investments in India, is developing integrated gas transmission and distribution systems in the west of the country. This agreement confirms BG's strong commitment to India and underpins Gujarat Gas's strategy for extending its network and for supplying growing markets in the region."

Gujarat Gas, India's largest privately owned gas distribution company, will also benefit financially from third party access in its 73 kilometres Hazira-Ankleshwar transmission pipeline, following a gas sales agreement signed between the Lakshmi field co-venturers and Gujarat Powergen Energy Corporation.

BG Group has a 65.13 per cent shareholding in Gujarat Gas. The remaining 34.87 per cent is held by the Gujarat State Government, financial organisations and the public. It is a listed company in India.

The Lakshmi field was discovered in May 2000 and production is scheduled to begin by July 2002. Gas will be delivered to a new terminal being built by Cairn Energy and its partners at Suvali prior to entering Gujarat Gas's gas transmission system. The licence consortium comprises operator Cairn Energy with a 50 per cent shareholding, TATA Petrodyne Limited which holds a 10 per cent stake and Oil and Natural Gas Company (ONGC), which holds the remaining 40 per cent.

Notes to Editors

BG Group has been involved in India for over ten years. Its entry into the energy market has culminated in two natural gas distribution companies - Gujarat Gas Company Limited and Mahanagar Gas Limited.

Gujarat Gas has over 125,000 domestic customers, some 1,600 commercial customers and about 425 industrial customers. The company supplies major cities including Ankleshwar, Bharuch and Surat in south Gujarat. Just under two years ago Gujarat Gas commissioned the 73km Hazira-Ankleshwar transmission pipeline. The company also operates compressed natural gas (CNG) filling stations for vehicles and an increasing number of auto-rickshaws that are fuelled by gas.

BG Group is also a 50:50 joint venture partner in Mahanagar Gas with the Gas Authority of India Limited (GAIL). It was established in 1995 to develop a natural gas network in Mumbai (formerly Bombay). Presently the company delivers gas to about 38,000 customers. It also sells CNG for vehicles in the city where there are about 22,000 vehicles running on CNG - most of which are taxis.

BG Group is also playing an important role in the proposed development of a liquefied natural gas (LNG) importation terminal in the port of Pipavav, Gujarat State.