BG Group plc has received approval today to construct and operate a €330 million liquefied natural gas (LNG) importation terminal in Brindisi Port, on the south-east coast of Italy.

Negotiations for LNG supply to the terminal and for onward sale to gas users are being progressed. BG Group aims to sanction the project by the end of 2003.

The project was approved via the Conference of Services 'Article 8' comprehensive authorisation process (Bassanini law/340, 2000) held by the Ministry of Productive Activities and representing national, regional and local authorities. A formal decree is expected to be issued shortly.

The regasification terminal, proposed to be constructed in two phases and operated by BG Group, would enable imports of natural gas into the Italian market by the end of 2006. Phase 1 envisages a throughput of 3 million tonnes per annum (mtpa) increasing to 6 mtpa in the second phase.

Martin Houston, Executive Vice President, BG Group plc, said: "Approval for the Brindisi project gives BG Group the go-ahead to make one of the largest ever investments in Italy by a UK-listed company. Energy demand continues to rise in Italy and with it comes the opportunity for BG Group to diversify into the liquefied natural gas sector and deliver new sources of supply. This move enables us to expand our commitment to Italy and play an increasing role in the liberalising energy market. As a Group, we continue to consolidate our position in the Mediterranean region and grow as a liquefied natural gas supplier and gas wholesaler."

Italy is a net importer of natural gas and has one LNG receiving terminal in operation on the north-west coast of the country. Over the last decade, energy demand has been continually growing and in 2010 is forecast to be about 25-30 per cent higher than today's present demand. Predominantly, this growth is expected from the power generation sector.

The Brindisi terminal, which would be the first to be built in the South, is strategically placed on the Mediterranean Sea coast to receive imports from North Africa and the Gulf States. Its location is in close proximity to reach those areas of high power generation demand in the Puglia region and surrounding regions.

The importation terminal is within five kilometres of Snam Rete Gas's 29,600 kilometres national gas transmission and distribution network.

Environmental impact and safety studies have been carried out which support the use of the Brindisi Port and harbour as having suitable deepwater marine facilities for a project of this scale. Preliminary Front End Engineering Design (FEED) work has been conducted and further work to finalise the plant design is under way. In addition, contractors are being pre-qualified for ground investigations.

It is estimated that up to 1,000 jobs could be generated during the construction phases and about 250 direct and indirect jobs created over the operational lifetime of the plant.

Notes to Editors

BG Group in Italy

BG Group has been active in Italy since 1992 and operates as BG Italia in the Exploration & Production and Power Generation sectors. To date, the Group has invested about €180 million in the country's energy sector.

With Italian partners, BG Italia has 12 exploration permits in the Sicily Channel and in the Po Valley and operates six of these. In April 2002, a significant gas discovery was made in the Panda exploration prospect, off southern Sicily.

BG Italia is a shareholder in Serene S.p.A., a joint venture company, which owns and operates 400 megawatts of co-generation units located in five sites adjacent to Fiat Auto factories.

BG Group's LNG Business

LNG comprises one of BG Group's core business segments. As a pioneer of LNG transportation from Lake Charles, Louisiana to Canvey Island, England in 1959, BG continues to be at the forefront of LNG activity and is involved in six developing projects across four continents.

In Trinidad & Tobago, BG and partners are developing the third train of Atlantic LNG at Point Fortin, which is due to increase production to nearly 10 mtpa in the second quarter of 2003. A second train of 3.3 mtpa was brought into production in August 2002 and the development of a fourth 5.2 mtpa train is under discussion with the Government of Trinidad & Tobago.

BG and partners are moving forward with the development of the US$900 million Egyptian LNG scheme at Idku, east of Alexandria. An agreement for the sale of a 3.6 mtpa first train was signed with Gaz de France for import into the French market over a 20-year period. First production is scheduled for mid-2005 and output from a proposed second train of the same size is being marketed. Un-contracted gas reserves from the offshore West Delta Deep Marine concession will underpin the project.

Towards the end of September 2002, BG and partners in the Tanguuh project in Indonesia signed a Sale and Purchase Agreement for 2.6 mtpa of LNG for the proposed Chinese LNG terminal, Fujian, for a 25-year period. Construction of the Fujian terminal is expected to start in 2004 and operations scheduled to begin in 2007. Marketing of Tangguh LNG continues to a number of customers.

BG is the sole developer of the Pipavav LNG importation project on the west coast of India. This scheme envisages regasification for sales of 2.65 mtpa rising to a possible 5.3 mtpa from 2007, into the Indian market. A FEED study and the pre-qualification of the Engineering, Procurement and Construction (EPC) contract have been completed.

In Bolivia, BG and partners have formed Pacific LNG which is seeking to produce and sell gas from the Margarita field to the west coast of the USA. The project envisages a liquefaction plant on the Pacific coast.

In January 2002, BG took 80 per cent of the capacity at North America's largest operating import terminal, Lake Charles in Louisiana, which has the capability to receive, store, vaporise and deliver an average daily send-out of 630 million standard cubic feet of gas. From September 2005, BG will take 100 per cent of the capacity.

BG has access to a fleet of LNG ships including the two it owns which are on long-term charter in the Atlantic Ocean and Mediterranean Sea. It has charters on four other ships which are used on long and short term trades; is expecting delivery of two new chartered ships in 2003 and 2004; and has options for a further six new build ships.