Liquefied Natural Gas (LNG)

During 2010, BG Group used its flexible liquefied natural gas (LNG) supply and market knowledge to divert cargoes to high-value markets. The Group’s LNG business is established on a solid foundation capable of delivering sustained and material profits.

BG Group took the final investment decision for the first phase of the Queensland Curtis LNG (QCLNG) Project in Australia.
Signed sales agreement with Tokyo Gas Co. Ltd. (“Tokyo Gas”) to supply 1.2 million tonnes per annum (mtpa) of LNG from 2015.
First tranche of contracts for regasified LNG under the aggregator agreement in Singapore.
Signed heads of agreement with Chubu Electric Power Co. lnc (“Chubu”) to supply up to 120 cargoes over 20 years.
Took delivery of four new-generation, energy-efficient LNG carriers.
Supplied LNG to 19 countries in the year.


The LNG cycle

BG Group’s LNG activities combine liquefaction and regasification facilities with the purchasing, shipping, marketing and sale of LNG.

	Exploration and production BG Group discovers and extracts gas. Onshore and offshore platforms collect gas from drilling wells, then transport it to liquefaction facilities.


	Liquefaction A liquefaction facility cools gas to -160˚C, condensing it to 1/600 of its volume, allowing for economical transportation.


	Shipping The LNG is loaded onto specially built ships designed to hold super-cooled gas. LNG can be transported to any country in the world with a regasification terminal.


	Regasification The LNG is warmed at the terminal, converting it back to gas for distribution.

Marketing
In addition to BG Group’s own LNG resources, the Group also buys gas resources under long-term purchase agreements or on the spot market in order to meet LNG demand.

Overview
Liquefaction

BG Group has equity stakes in liquefaction facilities in Egypt and Trinidad and Tobago.
The Group’s equity share of liquefaction volumes from these interests in 2010 was 6.4 mtpa.

2010 key events

BG Group approved the final investment decision for the first phase of QCLNG – the development of a 8.5 mtpa two-train liquefaction plant on Curtis Island in Queensland, together with the associated upstream and pipeline facilities.
Notices to proceed were issued to the main contractors appointed for the development of the first phase of QCLNG.
The China National Offshore Oil Company (“CNOOC”) became a 10% equity investor in QCLNG liquefaction train 1.
Signed sales agreement with Tokyo Gas to become a 2.5% equity investor in QCLNG liquefaction train 2.

Outlook

From 2011 to 2014, BG Group plans to invest approximately US$15 billion in developing the first two-train liquefaction plant together with the associated upstream and pipeline facilities.
Possible further expansion of QCLNG with a third LNG train.
First LNG exports planned to commence from QCLNG in 2014.


Regasification:	back to top

BG Group has regasification capacity rights in the USA through terminals at Lake Charles, Louisiana and Elba Island, Georgia and in the UK through Dragon LNG in Wales.
BG Group is continuing to pursue the development of the Brindisi LNG terminal in Italy.
In Chile, BG Group has 40% ownership of GNL Quintero S.A, which owns and operates the 2.5 mtpa LNG import terminal located in Quintero Bay.

2010 key events

Upgrades to the Lake Charles terminal came online in the first half of 2010. The upgrades include an ambient air vapourisation system which reduces emissions by reducing fuel gas consumption by up to 85%.
BG Group commissioned a natural gas liquids stripping facility at Lake Charles, which allows the Group to extract further value from liquid-rich cargoes.
The first phase of the 190-mile Elba Express pipeline was completed in the first half of 2010, transporting natural gas to eastern and south-eastern markets in the USA.
Construction of the import and regasification terminal in Quintero Bay was fully completed.
The Environmental Impact Assessment Decree was issued by the Italian Ministry of the Environment and Territory for the Brindisi LNG terminal. See also note 25(E) on page 123 in relation to legal proceedings.

Outlook

Second phase of US Elba Express pipeline expected to be in service by 2014, increasing capacity.
Initial LNG deliveries into Singapore expected in 2013.


Marketing	back to top

BG Group has a portfolio of flexible LNG supplies that can be deployed globally in order to capture greater-margin opportunities.
The Group is engaged in marketing LNG both on a long and short-term basis. The combination of flexible supply, shipping capacity and commercial capability enables BG Group’s strategic approach to LNG marketing.

2010 key events

Managed LNG volumes totalled 13 mtpa. These are volumes supplied to BG Group under long-term purchase agreements in place with Atlantic LNG, Egyptian LNG, Equatorial Guinea LNG and Nigeria LNG, as well as the purchase of 23 spot cargoes.
In total, the Group delivered 215 cargoes. 55 cargoes were delivered to the USA, with 14 to Lake Charles, and 37 to Elba Island.
Supplied cargoes to 19 countries in the year. BG Group has now supplied 22 of the 23 countries able to import LNG.
Sales agreement with Tokyo Gas to supply 1.2 mtpa LNG over 20 years from the QCLNG facility.
The Group signed the first tranche of gas sale and purchase agreements for up to 20 years with Singapore power generation companies.
The Group executed a heads of agreement with Chubu, for the long-term supply of LNG. This included the purchase of up to 120 cargoes over a 20-year term commencing in 2014.

Outlook

BG Group plans contracted supply of approximately 20 mtpa by 2015, underpinned by the sanction of QCLNG.
The Group will continue its strategy of long-term supply agreements, coupled with sufficient flexibility to take advantage of opportunities in the global LNG market to divert cargoes to attractive markets.


LNG shipping	back to top

BG Group has a core fleet of modern doublehulled LNG carriers that it owns or has under long-term charter. In addition, the Group contracts additional shipping as required on a short, medium and long-term basis in order to maintain a balanced shipping position.
The Group’s shipping strategy is to control a fleet to meet short, medium and long-term commitments.

2010 key events

BG Group took delivery of four new-generation, energy-efficient LNG carriers. These are among the first carriers in the world to integrate onboard reliquefaction with the propulsion system, allowing natural gas boil-off to be consumed as fuel or reliquefied and returned to cargo tanks.
The four new carriers are more efficient and produce fewer emissions than conventional steam vessels due to their tri-fuel, diesel-electric engines and efficient hull form.
During 2010, the Group utilised between 17 and 23 ships at any one time.

Outlook