E&P 

BG Group is building a significant business in Brazil through oil and gas reserves in the Santos Basin. Brazil is a key growth asset in the Group portfolio, offering significant reserves, ease of access to world crude markets, and a growing domestic gas market.

Press release: 18 February 2013 BG Group starts new extended well test at Sapinhoá North, offshore Brazil Press release: 8 January 2013 First production from Sapinhoá field, offshore Brazil Press release: 6 November 2012 Sale of Comgás stake completed Press release: 20 July 2012 Approval of key contracts and additional FPSO unit tender, offshore Brazil Press release: 29 May 2012 Definitive binding agreement signed for sale of Comgás stake Press release: 3 May 2012 Memorandum of understanding signed for sale of Comgás stake Press release: 12 April 2012 Discussions around shareholding in Comgás Press release: 10 April 2012 Appraisal well confirms extension of Santos Basin discovery Press release: 5 March 2012 BG Group begins new well test in Santos Basin, offshore Brazil Press release: 1 March 2012 BG Group progresses additional funding facility for up to $1.8 billion  Binding agreement for sale of 60.1% holding in Comgás Declaration of Commerciality (DoC) taken on Sapinhoá (formerly Guará)

Key dates

1999
Purchased controlling stake in Comgás

2000
Acquired pre-salt non-operated acreage in Santos Basin

2005
Drilling programme began in deep water Santos Basin

2006
Lula (BM-S-11) oil and gas discovery made in the Santos Basin

2008
Sapinhoá announced as an oil discovery on BM-S-9

Iara announced as a material oil discovery on BM-S-11

2010
DoC taken on Lula (formerly Tupi)

Production from first permanent FPSO on Lula commenced

2011
Reserves and resources doubled since 2010; upside potential now 8 billion boe*

Reservoir performance significantly reduces unit costs; unit resource value increased

*Based on BG Group estimates

BG Group has interests in four blocks in the Santos Basin, offshore Brazil. The exploration success and scale of resources discovered in the Santos Basin to date have been exceptional.

In June 2011, BG Group issued a material reserves and resources upgrade* for its interests in the pre-salt Santos Basin. Mean total reserves and resources are now estimated to amount to some 6 billion barrels of oil equivalent (boe) net to BG Group, with an upside potential of 8 billion boe net. The aggregate range of total reserves and resources net to BG Group is from 4 billion boe (P90) to 8 billion boe.

The Lula, Sapinhoá, Iracema, Iara and Carioca discoveries account for 95% of BG Group’s total reserves and resources in the Santos Basin.

The estimates which BG Group issued in 2011 were based on analysis of a wealth of drilling and appraisal data that had been gained in the Santos Basin, including:

• 29 wells drilled in existing discoveries;
• 19 drill stem tests (DSTs) on current discoveries;
• shooting and analysis of over 14 400 square kilometres of 3D seismic;
• analysis of extended well test (EWT) on Lula South, and early results from the Sapinhoá EWT;
• production from the first permanent FPSO on Lula;
• development plans that include enhanced recovery processes to improve ultimate recovery factors; and
• cost optimisation, potential de-bottlenecking of facilities and greater well productivity.

Significantly, BG Group expects that virtually all of the additional resources announced in June 2011, contained within the Lula, Sapinhoá, Iracema, Iara and Carioca discoveries, will be recovered from the same surface facilities envisaged in BG Group’s field development plan prior to the resources upgrade.

The incremental volumes are thus of a substantially higher value and are expected to result in significant unit cost reductions and higher unit value for the now increased total resources base.

BG Group’s view*, as at February 2012, is that its interests in Brazil will support net production levels above 600 000 barrels of oil equivalent per day (boed) by 2020.

Additionally, in February 2012, BG Group provided data* on operational and capital costs. BG Group anticipates very low unit technical costs for this initial phase of development, amounting to capital costs of $5/boe and operating costs of $9/boe for leased FPSOs, and capital costs of $7/boe and operating costs of $6/boe for purchased FPSOs.

* Based on BG Group estimates

"Big five" discoveries

BM-S-9

In 2007, the Carioca well on BM-S-9 (BG Group 30%) was declared a discovery and the Sapinhoá well was announced as a discovery in 2008. Since the initial discoveries there have been further drilling successes including: Iguaçu, Abaré West, Sapinhoá North, Carioca North-East, Sapinhoá South and Abaré.

Sapinhoá

In December 2011, BG Group and partners announced the DoC with the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) for the accumulation of light oil and gas in the Sapinhoá area. The DoC is another significant milestone in the development of the Group’s substantial interests in the region, marking the start of the commercial production phase for the fields and setting the licence period to run to 2038.

The appraisal success with Sapinhoá has led the partnership to fast-track a 120 000 barrels of oil per day (bopd) and 176 mmscfd floating, production, storage and offloading (FPSO) vessel, with the objective of achieving first production in early 2013. Further development phases on Sapinhoá include another FPSO with capacity of up to 150 000 bopd oil and 211 mmscfd gas, with the objective of achieving first production in 2014.

Carioca

The Carioca North-East well was announced as a discovery in 2011. The well discovered light oil, nine kilometres north-east of the original Carioca discovery well. In late 2011, the results of an EWT on Carioca North-East indicated potential production of approximately 28 000 bopd, above initial expectations.

Given the promising results at Carioca, the consortium intends to do more appraisal work to further evaluate the area’s full potential. The DoC on Carioca is expected to be taken by the end of 2013, with a single FPSO development phase.

BM-S-10

In 2006, the Parati well in BM-S-10 (BG Group 25%) was declared a discovery. Work continues on this discovery and the remaining prospectivity.

BM-S-11
Lula and Iracema

Lula and Iracema in BM-S-11 (BG Group 25%) are very large structures with significant reserves potential. The Lula discovery well was drilled in 2006 and the Iracema discovery well which confirmed the presence of light oil in the north-west of the evaluation plan area was drilled in 2009.

There has been significant activity on Lula and Iracema since the original discoveries were made including appraisal wells, DSTs, EWTs and the start-up of the first permanent production facility. The first EWT on Lula flowed first oil in May 2009 and completed operations in December 2010. A second EWT on Lula North-East commenced operations in April 2011 and completed operations in November 2011. The information gathered will support the development of a permanent 120 000 bopd capacity FPSO, planned to be in operation in 2013.

A third EWT on Iracema commenced operations in March 2012 and will operate in the area for approximately six months. The well has been producing around 11 500 bopd, constrained by facilities. The information gathered will support the development of a permanent 150 000 bopd capacity FPSO, planned to be in operation in 2014.

Production from the first permanent FPSO on the Lula field commenced in October 2010. The Cidade de Angra dos Reis FPSO is expected to produce up to 100 000 bopd oil and up to 177 mmscfd gas. In July 2012, BG Group announced that the FPSO was close to capacity from just four producing wells and one injector well.

Iara

In 2008, BG Group announced the completion of drilling on the Iara well also in the BM-S-11 concession on a step-out block.

In 2011, BG Group announced the successful completion of drilling on the Iara Horst well. The well encountered good quality oil in a thick reservoir section. Initial results from Iara Horst have demonstrated superior reservoir characteristics to the discovery well located around eight kilometres away. A DST, completed in 2011, confirmed reservoir quality and well productivity.

In April 2012, BG Group announced the successful completion of drilling on the Iara West well. The results confirmed the westerly extension of the Iara accumulation and demonstrate the high potential of the pre-salt reservoirs within that area. Further evaluation activity continues, including an EWT planned for 2013. The DoC on Iara is expected to be taken by the end of 2013.

BM-S-50

An exploration well is planned in 2012 on Sagittario (BG Group 20%).

FPSOs

BG Group is progressing the contracting of a further 13 FPSOs, five leased and eight owned, in addition to the one currently producing on Lula. These are due to come onstream progressively over the period to 2017.

Oil evacuation

During 2011, BG Group took delivery of the oil tanker Windsor Knutsen, which is being used to transport BG Group’s equity oil from Brazil. The Windsor Knutsen was converted from a conventional Suezmax tanker into the world’s largest shuttle tanker, with the capacity to hold 1.1 million barrels of crude oil. First crude oil from the Lula FPSO was lifted in July 2011 and delivered in August 2011. As at July 2012, a total of six liftings have been made from Lula by BG Group. The Group has also committed to charter four further Suezmax shuttle tankers which will be delivered in the period 2013 to 2014.

Gas evacuation

Development plans for the associated gas resources in the Group’s Santos Basin interests have continued to advance.

In 2010, a new pipeline was installed connecting the Lula field to the Mexilhão gas hub. This pipeline has been used to export gas from FPSO 1, since September 2011, and is intended to carry gas from the next two FPSOs.

The partners in BM-S-9 and BM-S-11 have also approved the investment in the Cabiúnas pipeline. The pipeline will span approximately 380 kilometres and will connect the Lula field to a terminal at Cabiúnas, 180 kilometres north-east of Rio de Janeiro. The pipeline represents the next major phase of gas export infrastructure, providing capacity for up to four additional FPSOs.