BG Group plc and partners have signed today a Heads of Terms agreement with Gaz de France (GdF) for the sale of the output capacity of the first train of liquefied natural gas from Egyptian LNG (ELNG).

The agreement paves the way for full project sanction in the summer of 2002 once the detailed Gas Sales Agreement, Front End Engineering and Design (FEED), and planning formalities have been concluded.

ELNG, a joint venture company comprising BG Group, Edison International S.p.A., the Egyptian Natural Gas Holding Company (EGAS) and the Egyptian General Petroleum Corporation (EGPC), will construct and operate a US$900 million liquefied natural gas (LNG) export plant based at Idku, east of Alexandria.

The first train from ELNG will have a capacity of 3.6 million tonnes of LNG per annum under a 20-year contract, with first production scheduled for mid-2005. As part of the agreement, GdF will take a five per cent equity stake in ELNG and the Train 1 liquefaction plant.

Frank Chapman, Chief Executive, BG Group plc, said: "This will be the first sale from the Egyptian LNG project based on the very significant reserves BG Group and partners have discovered in the offshore West Delta Deep Marine concession. Our remarkable 100 per cent successful drilling record in the concession continues, providing sufficient reserves to support the immediate marketing of Train 2. Gaz de France is Europe's largest LNG buyer and the gas supply agreed today equates to about ten per cent of France's current annual gas demand. We welcome Gaz de France as the first customer of Egyptian LNG and also as a partner in the project."

ELNG partners will operate the LNG export plant as a tolling facility. The commercial structure will also facilitate future plant expansions and processing of gas reserves by ELNG from other fields and Operators.

BG Group and Edison are currently developing the Scarab/Saffron fields in the WDDM concession which will produce up to 633 million standard cubic feet of gas per day (mmscfd). Train 1 LNG sales will be underpinned by 565 mmscfd of production from other WDDM fields beginning with the Simian field in 2005.

From 2005, BG Group will operate 1.5 billion cubic feet per day of gas production from fields in Egypt, rising to 2.1 bcf/d from 2006 when ELNG Train 2 is forecast to come onstream.

In September 2001, the partners commissioned Bechtel Inc., of the USA to undertake the FEED of the plant, storage tanks and marine facilities, based on the successful Atlantic LNG project developed by BG Group and other partners in Trinidad & Tobago. The FEED is on schedule to be completed in this quarter.

Notes to Editors

BG Group plc entered the Egyptian natural gas industry in May 1995 when the Rosetta and West Delta Deep Marine concessions, covering areas of 3,600 square kilometres and 8,500sq km respectively, were awarded. With partners, the Group has invested over US$1 billion in the country's energy sector and a further US$3 billion is expected to be invested in the coming years.

Since 1997 to January 2002, BG Group has executed a highly successful exploration and production programme including 35 exploration, appraisal and development wells. Thirty-three wells have encountered gas giving a 94 per cent success rate.

Rosetta Concession

The Rosetta project began delivering gas into the Egyptian National Gas Transmission System in January 2001 with a Daily Contracted Quantity (DCQ) of 200 million standard cubic feet of gas per day (mmscfd). From July 2002, 275 mmscfd is scheduled to be delivered.

Production during 2001 has exceeded the DCQ, averaging over 230 mmscfd.

The Rosetta development consists of six wells tied back to a 'not normally manned' platform, with a 66km gas/condensate pipeline to the onshore terminal, located near Idku.

West Delta Deep Marine Concession

In August 1999, a Gas Sales Agreement was signed to supply gas into the domestic market from the Scarab/Saffron field. The Scarab/Saffron field is the largest ever gas field development in Egypt and the first to use deepwater technology. First gas production is expected in the first quarter of 2003 at an initial DCQ of 400 mmscfd, rising to 533 mmscfd. The Scarab/Saffron DCQ rises to 633 mmscfd after LNG production from WDDM reserves begins.
Since April 1998, an ambitious drilling programme has been executed. This month saw the successful Solar-1 exploratory well in the Simian North Channel encounter a gas accumulation, realising the fourteenth successful well out of 14 drilled. The 2002 drilling campaign continues using the Atwood Hunter drilling rig.

Nile Valley Gas Company

In addition to BG Group's upstream activities, it is a 37.5 per cent shareholder in the Nile Valley Gas Company, which has a 25-year franchise agreement to develop a gas transmission system and market gas in Upper Egypt. First gas was delivered in 1999. It currently has 16,000 customers in Beni Suef.

Partners

Edison International S.p.A., is BG Group's partner in the Rosetta and WDDM concession and, together with other local partners, in the gas transportation and distribution business through the Nile Valley Gas Company. Edison is Italy's leading private energy group.

The Egyptian General Petroleum Corporation (EGPC) and the recently established Egyptian Natural Gas Holding Company (EGAS) are the State corporations that presently plan, implement and oversee policies relating to oil and gas corporations in Egypt. EGPC and EGAS co-ordinate these activities through their participation in companies involved in exploration, production, refining, processing, petrochemicals, distribution and transportation.

Gaz de France is an integrated group active in all sectors of the natural gas industry. It operates in exploration, production, trading, transmission, storage, distribution, energy management, air conditioning and heating. It is a leader in liquefied natural gas, storage and distribution technologies. The company has a strong presence in Europe and operates in alliances and partnerships in other countries.