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BG Group has one of the most significant exploration and production businesses in the offshore waters of the UK. BG Group’s interests are focused on the central North Sea and the Group employs a hub strategy to maximise value from its UK portfolio.

Press release: 18 March 2013 BG Group delivers key project milestone with Everest East expansion Gaupe, a tie-back from the Norwegian sector of the North Sea to Armada, commenced production

Key dates

1993
Everest and Lomond onstream

1997
Armada and J-Block first production

2001
Blake and Elgin/Franklin first production

2002
Jade first production

2003
Seymour first production

2007
Buzzard, West Franklin and Maria first production

2009
Asset exchange with BP, concentrating operations in the central North Sea

Dragon LNG operational

2010
Commercial operations commenced at Milford Energy Limited power plant

Note:
The operator company and its percentage in each asset is highlighted in bold.

BG Group believes there is significant remaining potential in the UK Continental Shelf (UKCS). BG Group’s position is focused in the central North Sea where the Group is operator of three key platforms and infrastructure hubs – Armada, Everest and Lomond – allowing the operational performance of mature fields to be optimised and the development of other opportunities in the surrounding area. The Group is actively pursuing opportunities around these infrastructure hubs by identifying nearby exploration prospectivity, infill wells and third-party business. Tie-backs to these hubs are possible from across the median line in the Norwegian Continental Shelf, as well as in the UKCS.

The UK accounted for 16% of BG Group’s total production in 2011. The Group aims to produce 50 mmboe per annum on average between 2012 and 2014.

In addition to core production hubs and exploration and appraisal interests on the UKCS, BG Group has a 62.42% interest in the Central Area Transmission System (CATS) offshore pipeline and onshore processing facilities, a 7.86% stake in the Shearwater Elgin Area Line (SEAL), and a 15.98% interest in the SEAL Interconnector Link (SILK) pipeline.

BG Group’s UK downstream activities encompass LNG importation and energy marketing. BG Group sells gas on a wholesale basis and exports gas for sale to, and purchases gas for import from, mainland Europe via the Interconnector.

Armada Hub Area

| Armada Infrastructure |

The BG Group-operated Armada gas condensate fields (Fleming, Drake and Hawkins) extend over 31 square kilometres and span five exploration blocks. Production began in 1997. BG Group owns 76.42% in Armada.

The SW Seymour area of the BG Group-operated Seymour field (BG Group 57%) was appraised successfully and drilled from the Armada platform, with first production in 2003. A second well in the NW Seymour area was brought into production in 2006. A NW Seymour replacement well was drilled in 2011, with first production in October 2011.

In 2003, BG Group assumed operatorship of the fallow Maria 16/29a-11Y discovery. Appraisal drilling identified and confirmed the viability of this discovery and the adjacent Maria Horst prospect. Maria (BG Group 36%) was developed via two sub-sea wells and tied back to the Armada platform, with production beginning in 2007.

The commingled stream of Armada, Seymour and Maria gas is exported via the CATS pipeline to Teesside. Liquids are transported through the Forties Pipeline System (Forties) to the Kinneil processing plant at Grangemouth. In 2011, net production from these fields was 4.82 mmboe.

Since 2009, the Rev field, a third-party two-well sub-sea development in the Norwegian sector of the North Sea, has been tied back to the Armada platform. BG Group receives a tariff payment for processing this production.

The Gaupe project (BG Group 60% and operator), a two-well sub-sea development in the Norwegian sector of the North Sea, commenced production in March 2012 and is tied back to the Armada platform. Gaupe is expected to reach a plateau production rate of around 15 000 boed gross during the third quarter of 2012 (see page 18 for full details).

Everest and Lomond

| Everest and Lomond Infrastructure |

BG Group operates the Everest field in which it has a 99.13% interest. Everest is situated in the central North Sea and first production began in 1993.

BG Group also operates the 100%-owned Lomond field which is situated in the central North Sea and first production began in 1993. Gas produced from the two fields is exported via the CATS pipeline and produced liquids are exported via Forties to Kinneil. Net production from the two fields totalled 5.44 mmboe in 2011.

Blake

BG Group has a 44% interest in, and is operator of, the Blake field, which is located 100 kilometres from Aberdeen in the Outer Moray Firth. Production started in 2001.

The field was developed in two phases. The first phase was the Blake Channel, which is a sub-sea development of six producing wells and two water-injection wells, tied back to an existing floating production, storage and off-loading vessel (FPSO) located over the Ross field some 9.5 kilometres away.

Development of the second phase, Blake Flank, was completed and production commenced from two wells in 2003. This sub-sea development is tied back through the existing Blake facilities to the Ross FPSO. In 2011, net production from the Blake field was 1.18 mmboe.

Jackdaw

The Jackdaw discovery straddles Blocks 30/2a (BG Group 44.1%), 30/2d (BG Group 35%) and 30/3a (BG Group 30.5%). Appraisal work continues on Jackdaw with a well successfully drilled and tested during 2011 and 2012. Results from the exploration and appraisal programme wells are being used to evaluate potential development concepts. First production is being targeted for 2017.

Buzzard

BG Group has a 21.73% interest in the Nexen-operated Buzzard oil field in the Outer Moray Firth which came onstream in 2007.

The facilities consist of a complex of four bridge-linked platforms, with oil export via Forties and gas export via the Frigg System. With gross estimated ultimate resources of around 700 mmboe, the field is one of the largest discovered in the UKCS in more than 10 years. Peak production rates have exceeded 225 000 bopd gross.

In 2010, an additional processing platform to remove hydrogen sulphide and extend plateau production was installed. Commissioning and start-up of this platform was completed in August 2011. In 2011, Buzzard produced 11.90 mmboe net to BG Group.

Elgin/Franklin Area

The Elgin/Franklin high-pressure/ high-temperature (HPHT) gas condensate fields are located in the central North Sea. The fields began production in 2001. A total of 15 wells, six from Elgin and nine from the Franklin platforms (including two wells from the West Franklin field), produced 6.35 mmboe net to BG Group in 2011. Total operates the Elgin/Franklin fields in which BG Group has a 14.11% interest. Production at Elgin/Franklin is currently shut-in due to a well control issue that occurred on the Elgin wellhead platform in March 2012. A successful well intervention was carried out in May 2012. BG Group continues to work closely with the operator to ensure that the issue is fully resolved and that production is brought back in a safe and timely manner.

A separate field, West Franklin (BG Group 14.11%), started production in 2007. In 2008, the West Franklin B appraisal well identified additional potential reserves and prompted the Phase 2 development. In 2010, Phase 2 of the development of the West Franklin field was sanctioned, which is aimed at producing estimated reserves of 85 mmboe and involves the drilling of three wells and the installation of a new platform tied back to the Elgin/Franklin facilities. Production is expected to commence in 2014.

The HPHT Glenelg field (BG Group 14.7%) started production in 2006. The field has been developed through a single well drilled from the Elgin wellhead platform. Elgin/Franklin, West Franklin and Glenelg gas is exported through SEAL to the onshore gas reception facilities at Bacton in Norfolk. Liquids are exported through Forties to the Kinneil processing plant at Grangemouth.

J-Block and Jade Area

The ConocoPhillips-operated Judy/Joanne (J-Block) gas condensate/oil fields and Jade gas condensate field are located in the central North Sea. BG Group has a 30.5% interest in J-Block and 35% in Jade. Production began from J-Block in 1997 and from Jade in 2002.

The Joanne field is a sub-sea development tied back to the manned Judy platform through two 5.5 kilometre pipelines. The Judy/Joanne fields currently produce from 16 wells.

Jade was developed using a normally unmanned wellhead platform and currently produces from eight wells. Production from Jade is exported via a sub-sea pipeline to the Judy platform where it is commingled and processed with Judy and Joanne production. The combined gas is then exported via the CATS pipeline to Teesside and the combined liquids stream exported via Norpipe to the Norsea oil terminal at Teesside. The 2011 combined net production was 7.81 mmboe.

The Jasmine discovery lies nine kilometres east of the Judy platform. The discovery straddles Blocks 30/6 and 30/7a (BG Group 30.5%). The mid-case recoverable reserves are estimated at around 170 mmboe. The Jasmine development will comprise a wellhead platform, with separate bridge-linked accommodation, tied back via a multi-phase pipeline and a new riser platform to the existing Judy production facilities. The project received government approval in 2010. First production is anticipated in 2013 with up to nine development wells planned in Phase 1.

Erskine

BG Group owns a 32% interest in the Chevron-operated HPHT Erskine field. Gas and liquids produced from the field are processed on the Lomond platform, with the gas then transported via the CATS pipeline, and liquids via the Forties Pipeline System.

CATS

In May 2011, BG Group increased its interest in the BP-operated CATS pipeline and terminal to 62.42% (from 51.18%). The 404 kilometre CATS offshore pipeline transports gas to Teesside from the Everest, Lomond, Andrew, Armada, Seymour, Judy/Joanne, Jade, Erskine, Banff, Eastern Trough Area Project (ETAP), Maria and Montrose Arbroath fields (all in the central North Sea). In 2009, CATS also started transporting gas from the Rev field, and in 2012 from the BG Group-operated Gaupe field, both in the Norwegian sector of the North Sea. The pipeline has a peak capacity of around 1 700 mmscfd. Onshore, the CATS Teesside terminal includes two gas processing trains, with a total capacity of approximately 1 200 mmscfd.

SEAL and SILK

BG Group has a 7.86% interest in SEAL, a 474 kilometre gas export pipeline to Bacton. With capacity of around 1 150 mmscfd of dry gas, it has been transporting gas from the Elgin/Franklin and Shearwater fields since 2001.

BG Group also has a 15.98% interest in the 900 metre SILK pipeline that provides direct access from SEAL to the UK-Continent Interconnector pipeline.

Dragon LNG

In 2009, the Dragon LNG import terminal at Milford Haven in Wales became operational. Ownership of the terminal is BG Group 50%, PETRONAS 50% and there are 20-year arrangements in place governing the use of capacity rights (BG Group 50%, PETRONAS 50%), allowing BG Group and PETRONAS to each send out up to 3 bcm (106 bcf) gas per year, from approximately 2.2 mtpa LNG. BG Group has contracted pipeline capacity with National Grid.

BG Group’s intention is to use the Dragon terminal capacity when UK prices are internationally attractive, sourcing the LNG from its global supply portfolio.

At the Dragon LNG terminal, commercial operations of the Milford Energy Limited (MEL) (BG Group 50%, PETRONAS 50%) plant commenced in 2010. MEL is a combined heat and power plant supplying up to an aggregate of 48 MW of electricity to Dragon LNG and the grid and 73 Megawatt thermal (MWth) of heat, in the form of hot water, to Dragon LNG. The plant is supplied with natural gas from Dragon LNG.

On 28th December 2011 new European Commission regulations came into effect prohibiting market trading abuse in [European] wholesale energy markets.

The Regulation for Energy Market Integrity and Transparency (REMIT, EC/1227/2011) prohibits market manipulation and trading on inside information* in relation to wholesale energy products.

In order to comply with the new regulations, and until there is a centralised information platform for REMIT related information, BG [Europe Gas & Oil Trading] intends to disclose information required under the new regulations on a ‘BGGASOPS’ Twitter account. Any information released will be at a level suitable to the market and will not disclose duration or cause. If you are interested in this information, please follow us at @BGGASOPS.

*It should be noted that inside information in this context refers to wholesale gas price movements rather than share price.
The criteria for the information being published is as follows: it has to be non-public, precise and likely to be of significant price effect.

In the majority of cases, we would expect operators of infrastructure (e.g. Dragon LNG) to be publishing the information where there is likely to be a significant price effect. It should be noted that National Grid’s near real-time flow information also provides key information to the market.