In 2009, the LNG business reported total operating profit* of £1.55 billion, benefiting from the Group’s strategic approach to LNG marketing.
BG Group’s Liquefied Natural Gas (LNG) business performed well against a backdrop of a 37% fall in Brent oil prices and a 53% fall in Henry Hub gas prices, delivering total operating profit of
£1 551million. Terming out short-term volumes into premium markets and the associated hedging of its profits enabled the Group to lock in a significant proportion of 2009 profits. In 2009, 68% of cargoes were delivered to markets outside the USA.
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 2009 was 7.0mtpa. This consists of 2.4mtpa from the two trains at Egyptian LNG and 4.6mtpa from the trains at Atlantic LNG in Trinidad and Tobago.
During 2009, significant progress was made on the QCLNG project. In February, BG Group entered into an agreement with the Queensland government to acquire a 270 hectare site at North China Bay on Curtis Island, the site of the proposed QCLNG liquefaction plant near Gladstone. An Environmental Impact Statement (EIS) for the project was released for public consultation in August. Front End Engineering Design (FEED)work for the liquefaction plant was completed and the EPC contracts were awarded in February 2010.
A decision on the EIS from the Queensland and Australian governmental authorities is expected in 2010, following which it is envisaged that BG Group will be able to approve investment in the 8.5mtpa, two-train LNG project. First cargoes of LNG are expected in 2014 from the first train, with the second train to follow six to nine months later.
In November 2009, BG Group announced the signing of a Joint Venture Agreement with Petrobras, to study a floating liquefied natural gas vessel as an additional option to commercialise the material associated natural gas reserves in the Santos Basin, offshore Brazil. Galp Energia and Repsol YPF joined the consortium in December.
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 2009, BG Group was responsible for importing approximately 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 south-east.
During 2009, work on two upgrades to the Lake Charles terminal continued – the ambient air vapourisation system and a natural gas liquids (NGL) extraction plant to remove higher British thermal units (btu) products such as ethane, propane and butane from the LNG. The new systems, expected to be fully onstream in 2010, are expected to reduce fuel gas consumption, thus enhancing margins, reducing emissions and providing an additional revenue stream from NGL sales.
 In July, construction of the Dragon LNG regasification terminal (BG Group 50%) at Milford Haven, Wales was completed and it received its first cargo of LNG that month. The plant commenced commercial operations in August and received a total of 12 cargoes during 2009. BG Group has rights to 2.2mtpa of capacity for 20 years. BG Group’s capacity in Dragon LNG will help the UK meet the increasing demand for imported gas, replacing declining supplies from the North Sea. It also provides BG Group with access to the UK market for its LNG.
Construction of the early gas facilities in the GNL Quintero (GNLQ) regasification terminal in Quintero Bay, Chile was completed in July, approximately two years after construction commenced. GNLQ became the first fully land-based regasification facility in the southern hemisphere and the first regasification terminal to commence operations on the west coast of South America.
The plant is being built in a phased approach with the early gas capacity of 1.5mtpa being expanded to 2.5mtpa when the terminal is fully operational in third quarter 2010. BG Group is a 40% shareholder in GNLQ and has a contract to supply up to 1.7mtpa LNG for 21 years. During 2009, eight cargoes were delivered to the terminal. Chile is an attractive market which is short of gas and where demand is counter-seasonal to northern hemisphere markets.
BG Group continues to pursue the 6.0mtpa Brindisi LNG regasification project in southern Italy, although no construction has taken place since February 2007. Brindisi LNG submitted the Environmental Impact Assessment (EIA) for the project in January 2008 and re-published the EIA in August 2009. The EIA decree is expected to be issued in the first half of 2010.
The timing of first deliveries to the Brindisi terminal is dependent on how soon access to the site can be restored and resolution of various outstanding legal matters.
 BG Group’s managed LNG volumes of 13.5mtpa in 2009were supplied from contracted volumes under long-term purchase agreements in place with Atlantic LNG, Egyptian LNG, Equatorial Guinea LNG, and Nigeria LNG, as well as the purchase of 21 spot cargoes. The Group is targeting an increase in long-term contracted supply to approximately 20mtpa by 2015. This includes the anticipated 8.5mtpa from the QCLNG project in Australia.
In 2009, BG Group managed 71 cargoes (2008 55 cargoes) delivered into US terminals and 151 cargoes (2008 172 cargoes) delivered to global markets. BG Group supplied approximately 6 million tonnes of LNG to the Pacific Basin.
BG Group supplied LNG cargoes to 17 countries during 2009, including its first ever cargoes to Canada, Chile, Kuwait and Portugal. Since 2005, BG Group has supplied 21 of 22 LNG-importing countries.
In 2010, global LNG supply is expected to increase significantly which, combined with the current weakness in global gas demand, will lead to increased pressure on pricing. 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.
BG Group was selected by Singapore’s Energy Market Authority to source and supply LNG to Singapore on an exclusive basis. In June, an Aggregator Agreement was executed for a term of up to 20 years and it provides for BG Group to supply up to 3mtpa of LNG. Initial deliveries will commence upon commercial operation of Singapore’s first LNG receiving and regasification terminal, which is now expected to be in 2013.
In May 2009, BG Group signed a LNG Project Development Agreement with China National Offshore Oil Corporation and its affiliates (“CNOOC”), focused on the QCLNG project. The agreement sets out the basis on which CNOOC will purchase 3.6mtpa of LNG for 20 years from the start-up of QCLNG. CNOOC will purchase a 5% interest in the reserves and resources of certain of BG Group’s Walloons Fairway tenements in the Surat Basin, CNOOC will also become a 10% equity investor in the first train of QCLNG and BG Group and CNOOC will jointly participate in a consortium to construct and own two LNG ships in China. The transactions will be conditional on applicable government and regulatory approvals.
Upon execution of a fully-termed sales agreement with CNOOC, BG Group's arrangements for the supply of LNG to Chile (up to 1.7mtpa), Singapore (up to 3mtpa) and China (3.6mtpa) will account for up to 8.3mtpa (at plateau volume), firmly underpinning development of the two-train first phase of the QCLNG project.
 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 2009, BG Group utilised 28 ships on average.
In 2010, BG Group will take delivery of four new-generation LNG carriers. These ships will be 170 000 cubic metre LNG carriers built for BG Group with tri-fuel diesel electric (heavy fuel oil/gas/marine diesel fuel) propulsion and reliquefaction capability. The new ships will be the first 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.
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