Annual Report and Accounts 2007

Transmission and Distribution

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2007 PERFORMANCE

2007 was another strong year for BG Group’s transmission and distribution businesses, with more customers and increased profitability. Volume throughput was lower at 9.3 bcma in 2007 (2006 11.9 bcma) due to BG Group’s divestment of its 25% equity stake in Interconnector (UK) Limited.

Brazil

Comgas (BG Group 60.1%) is Brazil’s largest gas distribution company. At the end of 2007, it was serving around 572 000 customers in the São Paulo concession area (2006 518 000; 2005 485 000).

Comgas’ sales volumes grew by 5% during 2007, helped by Brazil’s economic growth, higher demand from industry, increased natural gas vehicle (NGV) conversions and an expansion of the higher margin residential customer base. Comgas’ operating profit* increased by 13% to £211 million in 2007 (2006 £186 million), reflecting volume increases and margin improvements, as well as favourable currency movements. The Comgas network was extended by over 500 kilometres during 2007. This expansion is part of an ongoing five year expansion plan, which commenced in 2004. The expansion plan also involves the capture of higher margin residential customers, together with the simultaneous development of the industrial, NGV and co-generation markets.

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India

Gujarat Gas Company Limited (GGCL) (BG Group 65.12%) is India’s largest private gas distribution company. In 2007, its distribution sales volumes increased by 10% to 1 202 mmcm (2006 1 088 mmcm; 2005 810 mmcm), with its core retail business growing 20%.

Under its compressed natural gas (CNG) for vehicles expansion programme, GGCL added five new stations in Surat, Gujarat, taking GGCL’s total number of stations to 25 at the end of 2007.

GGCL now receives close to 80% of its supply from BG Group’s Panna/Mukta and Tapti fields.

Mahanagar Gas Limited (MGL) (BG Group 49.75%), which owns a gas distribution business in Mumbai, saw its 2007 volumes rise 2% to 506 mmcm (2006 494 mmcm; 2005 446 mmcm). The lower volume growth in 2007 was due to gas supply constraints.

Some of the increased volume at MGL in 2007 was driven by the growth of CNG through the installation of 12 new refuelling outlets, taking the total number of dispensing points in Mumbai, Thane, Mira-Bhayander and Navi-Mumbai to 623 at the end of 2007.

In 2007, MGL expanded its network in and around the city of Mumbai. In 2008, further expansion of the pipeline network to neighbouring towns is scheduled for completion. The number of connected domestic customers grew to 331 000 at the end of 2007 from 278 000 at the start of the year.

The Petroleum and Natural Gas Regulatory Board was set up in 2007 by the Government of India. The detailed regulations with which industry participants will be required to comply are expected to be issued in 2008.

UK

In June 2007, BG Group sold its 25% shareholding in Interconnector (UK) Limited for £165  million. BG Group retains both import and export capacity in the pipeline, which runs from Bacton in England to Zeebrugge in Belgium.

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Argentina/Uruguay

MetroGAS is the largest natural gas distribution company in Argentina. BG Group acts as technical operator. MetroGAS’ total volumes were down slightly in 2007 to 7 917 mmcm
(2006 7 944 mmcm). MetroGAS’ results have been deconsolidated since the end of 2005 as a result of financial restructuring.

BG Group is operator with a 40% share in the Southern Cross Pipeline linking Argentina to Montevideo.

High-growth markets

*

For a reconciliation between Business Performance and Total Results, see note 2.

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