UK Gas - the opportunities ahead

Transcription

1 BG Group UK Gas - the opportunities ahead Peter Hughes EVP Group Strategy 25 May 2005

2 Legal Notice The following presentation contains forward-looking statements concerning BG Group's operations, financial performance, strategy, outlook and growth opportunities. In particular we refer to the projects and assets expected to contribute to BG Group s growth to 2009 and beyond, including our revised 2006 targets, together with our plans for capital expenditure, our view of the economic outlook for the gas and oil sector and the demand for gas. Words such as believes, expects, anticipates, intends or similar expressions are intended to identify such forward-looking statements. By their nature, forward-looking statements involve uncertainty because they depend on, and relate to, future circumstances and events not all of which are within our control. Although BG Group believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in such forward-looking statements for a number of reasons, including but not limited to, changes in economic, market and competitive conditions; regulatory changes; governmental actions; fluctuations in commodity prices and exchange rates; supply and demand for oil and gas; the risks inherent in project implementation and delivery, and exploration and production activities; the inability or failure of co-venturers to meet contractual and/or funding obligations; natural disasters and adverse weather conditions; and war, sabotage and acts of terrorism. For a more detailed analysis of the factors that may affect our business, the results of our operations and our financial performance, we urge you to look at certain Risk Factors included in BG Group's Annual Report and Accounts BG Group undertakes no obligation to update any forward-looking statements. No part of this presentation constitutes or shall be taken to constitute an invitation or inducement to underwrite, subscribe for or otherwise acquire, or dispose of any ordinary shares, ADRs or other investment in BG Group plc or any other entity, nor does it advise any person to do any of the foregoing and this presentation must not be relied upon in any way in connection with any investment decision. Cautionary Note to US Investors The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation such as E&P reserves, risked exploration, unbooked resources, probable reserves, 2P reserves and initial reserves that the SEC's guidelines strictly prohibit us from including in filings with the SEC. US investors are urged to consider closely the disclosure in our Form 20-F, File No , available from us at BG Group, 100 Thames Valley Park Drive, Reading RG6 1PT, Attention: Company Secretary. You may read and copy this information at the SEC's public reference room, located at 450 Fifth Street NW, Washington, D.C Please call the SEC at SEC-0330 for further information on the public reference room. This filing is also available at the internet website maintained by SEC at 2

3 BG Group UK gas opportunities Overview Know UK market 8% share Strong demand Firm price environment Gas chain skills for UK, Norway and LNG sources Aligned with UK and Norwegian governments Deferred decline Buzzard, Atlantic/Cromarty, Maria Future prospects Dragon, UK hubs, Norway drilling Using strong market position to create future opportunities 3

4 BG Group Strategy Integrated Gas Major Integrated Gas Major Connect gas to high value markets Build and access markets Serve customers Secure low cost resources Equity reserves Contracted resources Skills to succeed across the gas chain Delivering exceptional value to shareholders 4

5 BG Group Strategy Gas market focus North America Focus Atlantic supply focus UK / Europe Focus Middle East / Caspian India Long term growth Bolivia/ Brazil Long term growth Developed Market Developing Market Supplies Connecting gas to markets 5

6 UK gas market Demand/Supply outlook BCM/Year UK: Gas Demand and UKCS Supply High demand Median demand Low demand The gas gap High supply Median supply Low supply Source:Woodmac and BG 6

7 UK gas market Potential new import infrastructure to UK market bcma Current UK Supply Deficit Import infrastructure Nameplate Capacity Vesterled (Norway - UK) Flags (Norway - UK) Langeled (Norway - UK) BBL (Holland - UK) Isle of Grain LNG Dragon LNG South Hook LNG Total UK Interconnector excluded; assume provides swing to UK Significant investment required in new import infrastructure 7

8 UK gas market The shape of the new UK gas supply pattern Gas supply will be multi-sourced It will arrive via a more extensive and flexible network than today Interconnector - with greatly enhanced import capacity - will provide swing capacity Langeled Norway to Easington Prospective BBL line from Netherlands to the UK Vesterled Norway into St Fergus LNG will add significant flexibility A flexible and robust multi-sourced gas supply 8

9 UK gas market Drivers influencing UK gas prices UK physically linked to Europe and increasingly influenced by European market prices In the longer term, UK and European prices will need to support investment in new gas supplies from; Norway Russia / CIS North African and Middle Eastern LNG UK prices linked to mainland Europe 9

10 BG Group s response to the changing market A multi-sourced, flexible approach Operations today Projects to 2006 and enhancements Beyond 2006 Outer Moray Firth Blake Norwegian exploration Buzzard, Cromarty, Atlantic Exploration Norwegian exploration CATS Potential Norwegian imports SEAL Central North Sea Armada, Seymour Everest, Lomond J Block, Jade, Elgin, Franklin, West Franklin, Glenelg, Maria Exploration Milford Haven LNG (Dragon) Schematic SILK Interconnector Interconnector additional reverse flow ECA Neptune, Mercury, Wollaston & Whittle Minerva, Amethyst Satellite developments, import infrastructure and new supplies 10

11 BG Group s response to the changing market Security of Supply Delivery record 8% UK market share World beating cost performance Cost* $/tpa Interconnector reverseflow expansion on track for Q Qatargas Nigeria RasGas ELNG T1 Oman ALNG T1 ALNG T1-3 ELNG T1-2 Industry leading LNG performance: ELNG Train 1-3 months ahead of schedule ELNG Train 2-6 months ahead of schedule Source: BG-Group * Total project cost excl. financing. All non-bg projects are based on 2-train build World beating project delivery Years 18 EPC award to first LNG 16 LNG project to EPC contract Nigeria Qatargas Oman RasGas ALNG ELNG Source: BG-Group Project skills to deliver on time and budget 11

12 BG Group - Long term growth Additional projects: North Sea 22/3b, 4b & 8b Maria Example: Armada Hub M-Spoke G-Spoke UK Armada Norway V-Spoke S-Spoke S.W. Seymour 15/12 N.W. Seymour Pi Enhancing multiple hubs Increasing hub production Near hub discoveries Forties CATS Near hub prospects Assets 3 rd Party Business Oil Discovery Prospects New licences M&A High value barrels 12

13 BG Group UK Upstream Example of enhancements to current assets Armada (BG 47% + operator) PDA 2004 award SW Seymour connected in 2003 Maria Maria successful appraisal 35mmboe - tie-back Q NW Seymour tie-back Q PL292 Exploration acreage in both UK & Norway 22nd round award Seymour Acquisition of interest in PL292 Armada hub utilising existing infrastructure 13

14 BG Group UK Upstream upcoming developments Atlantic & Cromarty Area Development Project Joint Development Team (BG and Hess) c 200mm capital investment Project approximately 70% complete Drilling started March 2005 First gas anticipated Q Exploration Opportunities for drilling in 2005/06 Potential ullage fillers for pipeline and infrastructure First production late 2005 plateau 220 mmscfd gross 14

15 BG Group UK upstream upcoming developments Buzzard 21.7% equity Project approx 65% complete (excluding drilling) Detailed engineering complete Jackets >95% complete. Jacket & pipeline installation planned Summer 2005 Commence production anticipated Q to bopd forecast peak production Largest current development project in UKCS 15

16 BG Group UK Upstream Decline to 2007 arrested 000 boed A Field enhancements J Block Everest Neptune Armada Blake New discoveries Maria NW Seymour 2004 view Field enhancements New discoveries At 2005 reference conditions (see appendix) Significant value addition 16

17 BG Group Long term growth UK/Norway exploration 3/4 year drilling programme to explore: UK: Continuing exploration around existing hubs UK: 21 st and 22 nd Licensing acreage Norwegian opportunities One of the most active explorers in the region 17

18 Upstream potential Hydrocarbon resources Billion boe 81 Gas Liquids Exploration potential % 44% Reserves & resources Produced Gas 23% Liquids 77% UK Continental Shelf Norway Continental Shelf Source: UKOOA; NPD Great remaining potential in Norway weighted towards gas 18

19 BG Group Upstream future potential Norway Entered in 2004 Acquired stakes in 3 licence areas close to PL297 Now hold interests in 9 licences: PL297 (100%) Operator PL292 (60%) Operator PL335 (52%) Operator PL324 (30%) PL325 (30%) PL143 (30% + 10% contingent) PL143C (20%) PL 298 (20%) PL337 (25%) PL324 PL325 North Sea PL337 PL292 PL335 Norwegian Sea PL297 PL298 PL143 PL143CS Barents Sea Rapid organic growth 19

20 BG Group Upstream future potential Exploration well density UK & Norway wells drilled Source: NorskHydro; Petrobank (December 2003) Norway relatively unexplored 20

21 BG Group Response to UK gas needs - summary Growth of existing North Sea hubs Continued UKCS exploration Norwegian licences LNG via Milford Haven Imports via Interconnector Range of methods for sustaining & developing supply 21

22 BG Group - UK gas Opportunities ahead - Conclusions UK/Norway continue to supply NW Europe NW Europe market becoming linked to Atlantic Basin LNG markets Gas remains a crucial part of the UK energy mix Increased need for imports Infrastructure planned to meet requirements BG positioned in market place to contribute UK/Norway a key region for BG Group 22

23 Appendix 23

24 BG Group UK upstream UK production in 2004 Field Amethyst Armada and Seymour Blake ECA Elgin/Franklin Everest J Block / Jade Lomond Total UK Total BG Group BG Group % / / / mmboe % of BG Group production in

25 BG Group UK upstream Key assumptions REFERENCE CONDITIONS Brent Oil price US$23/bbl UK uncontracted 21pence/therm US Henry Hub $4.30/mmBtu US/UK exchange rates of $1.80: 1 US/UK inflation rates of 2.5% per annum Prepared under International Financial Reporting Standards applicable as at 1 January 2005 Lake Charles assumed as a finance lease under IFRIC 4 from 1 January 2006 PRINCIPAL RISKS Major recession or significant political upheaval in the major markets in which we operate Failure to ensure the safe operation of our assets world-wide Implementation risk, being the challenges associated with delivering capital intensive projects on time and on budget, including the need to retain and motivate staff Commodity risk, being the risk of significant fluctuation in oil and/or gas prices from those assumed Foreign exchange risk, in particular the US$:UK exchange rate being significantly different to that assumed Technical, commercial, economic, regulatory and country risk For a detailed discussion of these and other risk factors, please refer to the Risk Factors included in BG Group s Annual Report and Accounts Actual performance could differ materially from that shown. Accordingly, no assurances can be given that such performance will be achieved. 25