UK: BG Delivered 197 LNG Cargoes in 2012

BG Group of UK said its LNG Shipping & Marketing total operating profit for 2012  increased by 13% to $2 577 million despite 11 fewer cargo deliveries, reflecting favourable market conditions and strong demand, particularly from Japan.

The tightening of the LNG market, which overall benefits the LNG Shipping & Marketing business, also resulted in a reduction in the number of spot cargoes available for purchase. Spot cargo purchases in the year declined from 22 to 15.

During the year, BG Group delivered 197 LNG cargoes, comprising 122 to Asia, 47 to South America, 19 to the USA, 8 to Europe and 1 to the Middle East (2011 208 cargoes: 109 Asia, 44 South America, 29 USA, 23 Europe and 3 Middle East).

Deliveries to Japan increased from 40 to 67, reflecting record demand as all nuclear units were offline by the end of the second quarter, of which only two were back online at year end.

Profits from liquefaction activities of $346 million for the year are now reported within the Upstream segment.

The total operating profit for the previously reported LNG segment was $2 923 million, exceeding the upper end of the $2.6 billion to $2.8 billion guidance range for 2012.

BG Group’s Chief Executive, Chris Finlayson said: “For the full year, BG Group delivered earnings growth of 3%. Cash flow from operations was strong, up 10% to $10.7 billion. Our LNG business performed well with total operating profit up 13%, demonstrating the value of our flexible LNG model, which allowed us to capture increased margins by diverting cargoes to higher value markets. A 3% increase in production was consistent with our third quarter guidance.

“Earnings in the fourth quarter were down 29% to $1.0 billion, primarily as a result of a one-off $277 million tax credit in 2011. Excluding this tax credit, underlying earnings fell by 13%, broadly in line with the 12% decline in total operating profit. In the Upstream segment, total operating profit decreased by 12%, and fewer LNG cargo deliveries combined with lower spot prices resulted in a 16% lower contribution from LNG Shipping & Marketing.”

On 2012 accomplishments, Chris continued “we made important progress on our key projects in Brazil and Australia. In January this year, in line with plan, we achieved the start of commercial production on the Sapinhoá field in block BM-S-9, via our second FPSO, and our third FPSO is also on schedule and on budget for production from the Lula field in block BM-S-11 in the second quarter of this year.

“In Australia, the Queensland Curtis LNG project made good progress towards first LNG in 2014. With 94% of the $20.4 billion budget now covered by contracts and other agreements, we are confident in delivering the first phase of this project on schedule and on budget. In December, we achieved a monthly record of 55 wells drilled. On Curtis Island, construction continues apace with work on the LNG storage tanks and jetties well advanced. We expect to have first gas in the LNG plant to enable commissioning to start around the end of the year. In the USA, we have further reduced our drilling activity to four rigs where lower pricing led to a non-cash post-tax impairment of $1.3 billion, previously reported in the second quarter.”

Chris highlighted BG Group’s exploration performance in 2012, saying “we continued to deliver excellent performance in exploration and appraisal, with 18 successful wells out of 19 tests in the year, including a further four successes in Tanzania. Elsewhere, our risked exploration resources grew by more than 20% with new licences acquired in Uruguay, Egypt, India and Trinidad and Tobago.

“We made outstanding progress with our portfolio rationalisation programme in 2012. We have now signed agreements expected to release $8.1 billion of capital by the end of 2013, exceeding our target given just 12 months ago. We have made the strategic choice to sell non-core businesses and have now exited our T&D segment, reinforcing our focus on E&P and LNG. Going forward, we will continue to keep our portfolio under active review and management.”

Chris said “our funding diversification programme continued to be well received, including three tranches of hybrid bonds, all over subscribed, which raised $2.1 billion from international markets, and we secured a $1.8 billion loan commitment from the Export-Import Bank of the United States.”

On outlook Chris said “I believe that 630 000 to 660 000 barrels of oil equivalent per day (boed) is an appropriate range for our 2013 production outlook, given the risks and opportunities we face. Given this starting point in 2013, and adjusting for the CNOOC deal, the Group’s previous guidance of more than 1 million boed will not be reached in 2015. Nonetheless, we still expect strong volume and cash flow growth in 2014 and 2015. We expect 2013 LNG Shipping & Marketing, on the new segment definition, to generate operating profit of $2.5 billion to $2.7 billion, slightly ahead of 2012 results.

“We have much to accomplish and clear milestones to deliver in 2013. We have seven projects coming onstream over the year. Our focus is squarely on safety and execution in both our growth projects and base assets. In Egypt, BG Group continues to keep the business environment under careful review. We have sanctioned the next phase of development for the West Delta Deep field, subject to partner approval, which will come onstream in 2014.”

Looking further ahead, Chris said “Importantly, we have begun a review of our longer-term strategy, and I look forward to sharing it with the market in May. We are a company with deep commercial and technical expertise alongside a high-quality resource base. Our strategy will build on our distinctive strengths, which clearly differentiate us from the majors in the industry: world class exploration, a unique LNG model and our commercial agility.”

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LNG World News Staff, February 5, 2013; Image: BG