BG and partners agree principal terms for Egyptian LNG Train 2

BG Group plc and Egyptian LNG (ELNG) Train 2 partners have agreed the principal terms for Liquefied Natural Gas (LNG) Sale and Purchase Agreements (SPAs) for the entire 3.6 million tonnes per annum (mtpa) output of Train 2 with BG Gas Marketing Limited, a subsidiary of BG Group.

In addition, ELNG Train 2 partners have awarded the Engineering, Procurement and Construction (EPC) contract to Bechtel Corporation for the construction of the Train 2 facilities and issued a Notice to Proceed under that contract. The US$550 million ELNG Train 2 is scheduled to start commercial operations in 2006.

LNG to be purchased by BG Gas Marketing under the first SPA is intended to be supplied to BG LNG Services for the Lake Charles LNG import terminal in Louisiana, USA. This SPA will initially cover the entire output of ELNG Train 2 but will provide for volumes to be switched to Brindisi as outlined below.

The second SPA will be for the supply of LNG to the proposed LNG import terminal at Brindisi in Italy which is being developed by BG Group and ENEL. This supply arrangement is expected to begin approximately one year after Train 2 commercial operations start.

Frank Chapman, BG Chief Executive said:

"We have set out our vision of an Atlantic Basin LNG strategy based on four cornerstone assets. We now have our interest in Atlantic LNG's three operating trains of LNG in Trinidad and we have also secured access to the Lake Charles LNG receiving terminal, the largest such facility in the USA. Together these assets give BG Group production and market access in the Western Atlantic. Today's deals are a major advance in our LNG business in the Eastern Atlantic and reinforce our position at Lake Charles. ELNG Train 2 is now progressing on the timetable we planned. Moreover, the entire LNG output from ELNG Train 2 will be purchased by BG and will be split between Lake Charles and our Brindisi receiving plant in Italy. This gives us material production in the Eastern Atlantic, expands the long term supply portfolio for Lake Charles and develops our access to the European market for LNG. We are making substantial and rapid progress in realising our Atlantic Basin LNG strategy."

Martin Houston, BG Group Executive Vice-President said: These agreements will advance Egyptian LNG to the next stage of its development and open up new export markets. Egypt is rapidly emerging as a global liquefied natural gas player and is set to become, in 2006, the world’s seventh largest LNG exporter and the fourth largest in the Atlantic Basin. The fast track development and ability to secure gas markets is a major achievement for BG Group, its partners and the Government of Egypt.

The Sapphire field in the BG-operated West Delta Deep Marine (WDDM) Concession, offshore the Nile Delta, will supply the gas for Train 2. Award of the engineering, procurement, installation and commissioning (EPIC) contract for the development of the Sapphire field is expected in July 2003.