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Operations Map
BG Group has been one of the leading LNG importers to the USA in recent years, with supply from both equity and third party projects. Additionally, BG Group supplied around 8.4 million tonnes of LNG to the Pacific Basin, againmaking the Group the largest Atlantic Basin supplier of cargoes into the Pacific Basin in 2008.
Key dates
2001
22-year lease signed for Lake Charles capacity
2003
Access to Elba Island terminal
2006
Two expansions of Lake Charles, increasing capacity to 13.4mtpa
Dighton power plant acquired
2007
Lake Road and Masspower power plants acquired
2008
LNG supply agreement signed with the EMA of Singapore
In June 2009, BG Group announced an alliance with EXCO Resources (EXCO) to develop US shale gas. The agreement provides BG Group with access to US onshore shale gas and complementary gas-gathering and transmission infrastructure.
BG Group owns a US power generation portfolio in New England with capacity of 1 234 MW.
Shale gas
BG Group entered the shale gas business via an alliance with EXCO in June 2009. The alliance brings material new resources and supply to the Group’s existing US business at a competitive price and in a prime location at the heart of the world’s largest gas market. These domestic exploration and production activities yield strong synergies with the Group’s established LNG import and US gas marketing business. Furthermore, the transaction increases BG Group’s exposure to long-term unconventional gas resources and skills.
BG Group:
- Acquired a 50% interest in approximately 120 000 net acres in east Texas and north Louisiana, of which 84 000 net acres cover the Haynesville shale gas formation;
- Entered into a joint development agreement with EXCO to co-operate in the further development and production of shale gas in east Texas and north Louisiana; and
- Acquired a 50% interest in related and complementary EXCO gas-gathering and transportation assets.
The acquisition adds 2.6 tcf of net potential resource to BG Group’s resources. Additionally, BG Group and EXCO believe there is substantial potential for growth in resources through further exploration and appraisal. EXCO will operate the jointly held upstream acreage.
Lake Charles
In 2001, BG LNG Services (BGLS), signed a 22-year LNG Terminalling Service Agreement to utilise the capacity of the LNG import facility at Lake Charles, Louisiana, USA.
The agreement was extended in 2004 to cover 100% of the terminal capacity for the term of the agreement. The terminal has access to 15 major intra-state and inter-state natural gas pipelines through the Trunkline Gas Pipeline system.
The Lake Charles facility has undergone two expansions, the latest of which was completed in 2006 and increased sustainable baseload capacity to 1.8 bcfd (with peak capacity of 2.1 bcfd) and added a second unloading berth. All of the capacity of the expansions is committed to BGLS.
In 2006, BGLS signed an agreement with Trunkline LNG, the owner of the Lake Charles terminal, for upgrades to the facility including an ambient air vapourisation system and a natural gas liquids (NGL) extraction plant to remove higher Btu products such as ethane, propane and butane from the LNG. The new system is expected to reduce fuel gas consumption by up to 85%, thus enhancing margins, reducing emissions and providing an additional revenue stream from NGL sales that is expected to start in second half 2009. As part of the agreement, Trunkline has also extended BGLS’s rights as the sole capacity holder by six years until 2029.
Elba Island
Beginning in 2004, BGLS established itself as the marketer of regasified LNG at Elba Island in Georgia after taking over contracted capacity and long-term LNG supply from El Paso in 2003. Additionally, BG Energy Merchants (BGEM) entered into a long-term transportation arrangement with Southern Natural Gas to construct the Cypress pipeline expansion of the Southern Natural Gas Pipeline system running from Elba Island to Jacksonville, Florida. Cypress Phases I and II are now up and running with the ability to supply approximately 336 000 mmbtud of natural gas to southern Georgia and Florida markets.
In 2007, approval was received to expand the terminal and construct the new Elba Express Pipeline in eastern Georgia. After the Elba Island expansion,
BG Group expects to have storage capacity of 8.2 bcf and send-out capacity of 1.2 bcfd. The Elba Express Pipeline, approximately 190 miles of pipeline with a capacity of 1.2 bcfd, will transport natural gas from Elba Island to markets in south-eastern and eastern USA. The facilities will be constructed in two phases, with the initial in-service date expected to be mid 2010.
Power
In 2006, BG Group entered the north-east US power market, chosen because it is both mature and transparent, with no dominant incumbents. The assets selected have been chosen to generate additional synergies from BG Group’s existing integrated gas business.
Dighton (165MW) is located in Massachusetts and is designed to run on natural gas, which can be supplied by BG Group through the Algonquin pipeline system.
Both Lake Road (805MW) in Connecticut and Masspower (264MW) in Massachusetts are dual-fuel capable plants designed to run on natural gas or distillate oil. Fuel to Lake Road is supplied through the Algonquin pipeline system while Masspower is supplied through the Tennessee Gas pipeline system. With both plants, the primary fuel is natural gas with distillate as the back-up fuel.
All three plants operate as merchant plants selling energy, capacity and ancillary services to the New England power market.
Storage
In addition to the significant inherent storage facilities at Lake Charles and Elba Island, BG Group will from time to time contract for natural gas storage capacity on a seasonal and/or medium to long-term basis to facilitate its operational and commercial requirements.
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This Code of Ethics ("Code") defines the conduct and certain business practices each employee and/or any other individuals authorized to bind BG Energy Merchants, LLC, BG Energy Merchants Canada Limited, BG LNG Services, LLC, and BG LNG Trading, LLC (collectively, the "Company") in commercial transactions (hereinafter referred to as "Employees") shall follow when engaged in such business activities.
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BG Group’s successful LNG business has been built around a portfolio of flexible LNG supplies that can be deployed globally in order to capture greatermargin opportunities. Central to this business model was the Group’s decision to take 100% of the capacity rights at the Lake Charles regasification terminal in the USA. This means that BG Group has a material point of access to the US gas market – the largest and most liquid in the world. This provides an economic bedrock for the Group’s LNG business model, giving the Group certainty that it can always achieve the prevailing US market price for its flexible volumes.
LNG supply
BG Group pursues a number of options to create a diversified supply portfolio. These options include buying LNG from third parties as well as from BG Group equity LNG liquefaction projects. The portfolio has a variety of contract periods and shipping arrangements.
In early 2009, BG Group completed the acquisition of Queensland Gas Company. The acquisition gives BG Group control of the Queensland Curtis LNG (QCLNG) project. BG Group expects to sanction a 7.4 mtpa, two-train LNG project in 2010, with first cargoes in 2014 (see Australia operations page).
The Group’s current contracted LNG supply is 12.6mtpa, with a target of 20mtpa to be achieved when QCLNG comes onstream from 2014. By 2015, excluding national oil companies, it is estimated that BG Group will be the second largest holder of contracted LNG volumes.
Marketing
BG LNG Trading (BGLT) in conjunction with the Group’s LNG shipping organisation is engaged in marketing LNG to buyers throughout the world. During 2008, BGLT directed over three quarters of its cargoes from their intended destinations in the USA to global markets. The combination of flexible supply, shipping capacity and commercial capability contributes towards a strategic advantage for BG Group.
In 2008/09, BG Group made its first deliveries of LNG to Argentina, Brazil, Chile, China, Greece, Portugal and Turkey. The Group has now delivered to 19 of the 22 current LNG importing countries. BG Group has also bought LNG from 11 of the 16 LNG producing countries.
In 2008, BG Group was selected to source and supply the EMA of Singapore on an exclusive basis with up to 3 mtpa of LNG for up to 20 years (see Singapore operations). In 2009, BG Group signed a LNG Project Development Agreement with China National Offshore Oil Corporation (CNOOC), focused on BG Group’s QCLNG Project in Australia. The agreement sets out the basis on which CNOOC will purchase 3.6 mtpa of LNG for a period of 20 years from the start-up of QCLNG (see China operations).
BGEM has a 3.5 bcfd US gas marketing business which markets regasified LNG from Lake Charles and Elba Island, along with indigenous gas supplies, to multiple intermediary and end-use customers via delivery through the US natural gas pipeline infrastructure. Sales are made under various short, medium and long-term arrangements. BGEM’s customers include leading gas and electric utilities, as well as industrial and wholesale gas merchants.
Shipping
BG Group has a long history in LNG shipping, having been involved in the development of both the prototype and the first working LNG carriers in the industry. BG Group’s shipping activities are primarily directed towards meeting the needs of the Group’s LNG trading. The Global Shipping organisation also provides governance, assurance and HSSE services to other BG Group marine operations and projects.
Four new owned LNG ships have been ordered for delivery in 2010. These new ships will be larger (170 000 cubic metres) than those currently owned, and will be powered by tri-fuel diesel-electric engines that are more efficient and produce fewer emissions than conventional steam vessels.
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 that it owns or has under long-term charter. In addition, 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 (see Data Book 2009).