UK: BG LNG Profit Down 12 Pct

BG LNG Profit Down 12 Pct

BG of UK said its LNG Shipping & Marketing total operating profit decreased 12% to $602 million in the third quarter of 2013, as the impact of fewer cargo deliveries and reduced margins was partly offset by lower hedging losses.

During the quarter, BG Group delivered 44 LNG cargoes, six fewer than in the third quarter of 2012, including two fewer cargoes from Egypt and three fewer from Nigeria as a result of disruptions in the quarter.

Cargo deliveries comprised 32 to Asia, 10 to South America, one to the USA and one to the UAE (2012: 50 cargoes: 31 Asia, eight South America, six USA, four Europe and one UAE).

BG Group delivered 132 LNG cargoes in January- September period, 17 fewer than in 2012.

BG Group’s Chief Executive Chris Finlayson said:

Earnings in the quarter were down 4% to $1.1 billion, largely as a result of lower volumes in both the Upstream and LNG segments. The primary driver for the decline in Upstream volumes is the US, where BG Group has reduced its rig count in line with its strategy of pursuing value over volume. We will see production recover in the fourth quarter with the completion of our North Sea maintenance shutdowns and new projects coming onstream, most notably Jasmine.”

Chris continued: “Our current priority is execution: the delivery of our 2013 milestones and of our growth projects. I am very pleased with our progress in Australia where we are moving into the commissioning stages. Gas has already flowed into the collection header system, and the main export pipeline is now in the ground with hydro-testing underway. Construction of the Ruby Jo compression stations and the processing plant is progressing well, ahead of commissioning in December. We expect to flow first gas to the plant around the end of the year. We are on track to deliver the world’s first coal seam gas to LNG project on schedule and within the $20.4 billion budget.

In Brazil, well performance from the Santos Basin continues to exceed expectations. The first three FPSOs have produced around 160 000 boed gross in the quarter, with each well on FPSOs 2 and 3 producing more than 30 000 boed gross. The buoyancy supported risers required for new wells to be hooked up to FPSOs 2 and 3 are all in country, with installation of the first unit underway after recent weather delays. The next two FPSOs to be deployed in the Santos Basin are on budget and expected to begin operations in 2014.

The third quarter also saw us continuing to deliver our milestones with the successful start-up of the Margarita Phase 2 and Bongkot Phase 3K projects in Bolivia and Thailand respectively. The facilities at Itaú in Bolivia are omplete, with start-up now expected in the fourth quarter. In the UK, an extensive planned maintenance programme is nearing completion with only the Lomond platform left to re-start in the coming weeks, and the Jasmine field is in the final stages of commissioning.”

With regard to Egypt, Chris noted: “The business environment remains difficult. During the third quarter, domestic offtake was higher than expected, averaging almost 1 bcf of gas per day, which was partially offset by receipt of compensatory LNG cargoes from Qatar. In October, domestic gas offtake reduced, with current rates at 700 to 750 mmscfd. The Egyptian government has stated that the domestic offtake will remain around this level during the final quarter. Further assurances regarding future domestic offtake levels and a material improvement in the outstanding debt position are required before releasing funds for the next phase of development.

Chris said: “Our strategy is driven by our world-class exploration and our unique LNG model. In Tanzania, the Pweza-3 drill stem test demonstrated that development wells could flow at significantly higher rates than expected, indicating that the Pweza reservoir has the potential to be the most prolific among our Tanzanian discoveries, reducing the likely well count and development costs.

“We are currently advancing four new LNG supply projects, and as the projects mature we will look for opportunities to manage our capital commitments through partnering. Working with the Block 2 partners in Tanzania, we have submitted our proposal for the LNG plant site for consideration by the government.

Additionally, we made good progress with the Lake Charles LNG export project where the Department of Energy gave conditional approval for exports to non-free trade agreement countries and where we signed an agreement with Energy Transfer to develop the terminal.

Chris added: “We continued to demonstrate our commitment to more active portfolio management with deals which will generate some $400 million of cash consideration from the disposal of our remaining 20% interest in the Quintero LNG terminal and the signing of a sales agreement for our entire 50% equity holding in TGGT.

In conclusion, Chris said: “As we enter the final quarter, we remain focused on execution. I also look forward to welcoming Simon Lowth on 2 December as BG Group’s Chief Financial Officer and Executive Director.

LNG World News Staff, October 31, 2013; Image: BG