The LNG business had an excellent year with total operating profit more than trebling.
LNG Highlights
- Commenced Queensland Curtis LNG (QCLNG) project
- Selected to source and supply Singapore for up to three mtpa from 2012 for up to 20 years
- First supplies of LNG to Argentina, Brazil, China, Greece and Turkey
- Supplied LNG to 13 countries in 2008
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QCLNG project
In Australia, BG Group expects to sanction a 7.4 mtpa, two train LNG project in 2010, with first cargoes expected in 2014.
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Global marketing
In 2008, BG Group delivered 55 cargoes into the USA and 172 cargoes to global markets. |
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New LNG markets
Since 2005, BG Group has supplied 18 of the 19 LNG importing countries, many of them new LNG markets.
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BG Group’s LNG business had an excellent year. It utilised its flexible portfolio delivering over three quarters of its cargoes to markets outside of the USA, contributing to record profits.
In October 2008, BG Group and QGC announced they had agreed the terms of a recommended takeover under which BG Group would acquire all the issued shares in QGC. For further details see page 22 of the 2008 Annual Report.
The strategic rationale for the QGC acquisition is clear and compelling. The acquisition offers a new and substantial source of LNG supply, wholly owned and BG Group operated, in a stable and attractive investment setting, with access to BG Group’s Asia Pacific customer base, in some of the world’s highest value markets.
Significant progress has been made on the Queensland Curtis LNG (QCLNG) project: agreement has been reached to acquire the Curtis Island site, which has been delineated for capacity of up to 12 mtpa; the Front End Engineering and Design work is well underway with Bechtel; and the Environmental Impact Assessment is expected to be filed by the middle of 2009.
This progress, together with the continuing success in proving up reserves, means that BG Group now expects to sanction a 7.4 mtpa, two train LNG project in 2010, with first cargoes expected in 2014.
In 2008, BG Group delivered 55 cargoes (2007 153 cargoes) into US terminals and 172 cargoes (2007 78 cargoes) to global markets. During 2008, managed volumes were 13.1 mtpa. BG Group supplied around 8.4 million tonnes of LNG to the Pacific Basin. This again made the Group the largest Atlantic Basin supplier of cargoes into the Pacific Basin.
BG Group supplied LNG cargoes to 13 countries, including its first ever cargoes to Argentina, Brazil, China, Greece and Turkey. Since 2005, BG Group has supplied 18 of the 19 LNG importing countries, including supplying Portugal in early 2009. In the near-term, global LNG supply is expected to increase which, combined with the current reduction in global demand, will lead to an easing of market tightness. BG Group has anticipated these market developments by contracting a proportion of the Group’s flexible LNG volumes into premium markets to protect short-term margins.
In April 2008, BG Group was selected by Singapore’s Energy Market Authority to source and supply Singapore on an exclusive basis with up to three mtpa of LNG for up to 20 years. Initial deliveries will commence upon commercial operation of Singapore’s first LNG receiving and regasification terminal, which is expected to be in 2012.
BG Group’s shipping is a key enabler for the LNG business to ensure delivery and provide flexibility to market cargoes. BG Group has a core fleet of ships and it contracts additional shipping as required on a short, medium and long-term basis in order to capture business opportunities and maintain a balanced shipping position.
During 2008, BG Group ordered two new ships, taking the total number of ships expected to be delivered during 2010 to four.
BG Group has equity stakes in liquefaction facilities in Egypt and Trinidad and Tobago. BG Group’s equity share of liquefaction volumes from these interests in 2008 was 7.0 million tonnes. This consists of 2.6 million tonnes from the two trains at Egyptian LNG and 4.4 million tonnes from the trains at Atlantic LNG in Trinidad and Tobago.
BG Group’s managed LNG volumes of 13.1 mtpa in 2008 were supplied from long-term purchase agreements in place with Egyptian LNG, Atlantic LNG, Equatorial Guinea LNG, and Nigeria LNG.
The Group is targeting an increase in long-term contracted supply to 20 mtpa by 2015. This includes the anticipated 7.4 mtpa from the QCLNG project in Australia.
REGASIFICATION
BG Group has regasification capacity rights in the USA through terminals at Lake Charles and Elba Island and is developing new terminals in the UK, Chile and Italy, which will further enhance the flexibility of BG Group’s global LNG portfolio.
During 2008, BG Group was responsible for importing just over 40% of LNG delivered into the USA. These volumes were principally delivered to the Elba Island terminal to meet BG Group's contracts with power generators in the southeast.
 Construction is close to completion at the Dragon LNG regasification terminal at Milford Haven, Wales. The terminal is now expected to be operational in the second quarter of 2009 (the Group had previously targeted 2008). Upon completion, BG Group will have rights to 2.2 mtpa of capacity for 20 years. Dragon LNG is aimed at meeting the increasing demand from the UK for imported gas to replace declining supply from the North Sea.
BG Group continues to pursue the 6.0 mtpa Brindisi LNG regasification project in southern Italy, although no construction has taken place since February 2007. In January 2008, BG Group filed an Environmental Impact Assessment (EIA). This followed the suspension of the original 'Article 8' authorisation in October 2007. Approval of the EIA and revalidation of the 'Article 8' authorisation is awaited. Criminal charges have been brought against certain current and former employees of BG Group, and against BG Italia S.p.A., in connection with allegations of improper conduct related to the authorisation process. The Brindisi site remains seized by the Italian authorities. The timing of first deliveries to the Brindisi terminal is dependent on how soon access to the site can be restored, approval of the EIA and resolution of the various oustanding legal matters. For further details of these proceedings and other legal proceedings in relation to the Brindisi project and the authorisation process see page 106 of the 2008 Annual Report.
Good progress is being made with the construction of the 2.5 mtpa Quintero LNG regasification terminal in Quintero Bay, Chile. BG Group's partners have contracted to purchase up to 1.7 mtpa LNG from BG Group for 21 years. The terminal, which is being built by GNL Quintero S.A. (BG Group 40%), is expected to be in early operation by mid-2009 and in full operation by the third quarter of 2010. Chile is an attractive market which is short of gas, where demand is counter-seasonal to Northern Hemisphere markets.
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