BG Group plc, which bought 80% of the import capacity at the Lake Charles, LA, liquefied natural gas (LNG) terminal last year and has an LNG import terminal in Canvey Island, England, bolstered its LNG supply with two large long-term contracts that could bring to U.S. markets a total of 5.9 million tonnes of LNG per year (274.2 Bcf/year).

Subsidiary BG LNG Services LLC (BGLS) signed a memorandum of understanding with Nigeria LNG Ltd. (NLNG) for a 20-year supply of LNG for the Lake Charles import terminal. The deal is for 2.5 million tonnes per annum (116.2 Bcf/year), beginning in 2005 or early 2006, from the NLNG Plus project (Trains 4 and 5) in Finima, Bonny Island, Nigeria.

In addition, the agreement allows for BGLS to start taking excess volumes this year from Trains 1, 2 and 3 that are not taken by existing long-term buyers. NLNG will be responsible for shipping the LNG to the Lake Charles terminal where BG has 80% of the capacity rights until September 2005 and 100% thereafter until 2024.

Subsidiary BG Gas Marketing Ltd. also signed an agreement with a Marathon Oil subsidiary for a 17-year supply of LNG (3.4 million tonnes per year or about 158 Bcf/year) beginning in 2007 from a proposed LNG project to be developed by Marathon and its partners on Bioko Island, Equatorial Guinea. Gas for the project would be sourced primarily from the Marathon-operated offshore Alba Field, in which it has a 65% interest. Approval of the LNG project by the government of Equatorial Guinea is pending.

“LNG from West Africa promises to play an increasingly important role in meeting the growing energy demands of the United States…,” said Marathon CEO Clarence P. Cazalot Jr. Marathon signed the agreement on behalf of its LNG project partner, GEPetrol, Equatorial Guinea’s state owned oil company.

“This agreement [with Nigeria LNG] and the Marathon announcement made today represent further major steps in building up our portfolio of long-term competitively priced LNG,” said BG CEO Frank Chapman. Definitive LNG agreements are expected by the end of the year.

Chapman also noted the agreement with Nigeria LNG secures delivery of trains four and five straight into Lake Charles and provides the opportunity to take additional cargoes from trains one to three into the U.S. market. The Lake Charles LNG facility, which Southern Union is in the process of buying from CMS Energy (see Daily GPI, May 13), currently is capable of storing 6.3 Bcf of LNG and sending out about 630 MMcf/d. But the facility is undergoing an expansion that will bring peak daily sendout to 1.2 Bcf/d and storage capacity to 9 Bcf by the end of 2005 (see Daily GPI, March 25).

BG has access to a fleet of LNG ships, including the two it owns that are on long-term charter in the Atlantic Ocean and Mediterranean Sea. It has charters on four other ships that are either sub-chartered or applied to transport BG’s trades. The company is expecting delivery of two new ships in 2004 and has options for a further five new-build ships.

LNG clearly is a core operation for BG, which not only has a stake in the Lake Charles facility, but has multiple supply and import projects across the globe. In Trinidad & Tobago, BG and partners have just brought a third train online, a 3.3 billion cubic meter/year facility that brings plant capacity to 12.8 Bcm/year (453 Bcf/year or about 1.2 Bcf/d) (see Daily GPI, May 12). BG is one of a consortium of companies owning Atlantic LNG which runs the Trinidad & Tobago gasification facilities. Other partners include BP, Repsol, Cabot Oil & Gas Co. and the National Gas Company of Trinidad and Tobago.

A significant amount of the Trinidad LNG will be headed to import terminals in the United States. While about 62.5% of the total output of Trains 2 and 3 is committed to the Spanish market, the remaining 37.5% is contracted to be sold in United States, mainly in the Southeast region through the refurbished Elba Island, GA, import terminal and the Lake Charles import terminal. Development of a fourth train is under discussion with the government of Trinidad & Tobago.

BG and partners also are moving forward with the development of a US$1.45 billion Egyptian LNG export facility at Idku, east of Alexandria. An agreement for the sale of the first train was signed with Gaz de France in October 2002 for import into the French market over a 20-year period. First production is scheduled for the third quarter of 2005 and output from a proposed second train, of the same size, is at an advanced stage of marketing.

In November 2002, BG received approval to construct and operate a US$330 million LNG import terminal in Brindisi Port, on the southeast coast of Italy. Construction is expected to begin in early 2004 for operations to start in 2007.

In Indonesia, BG and partners in the Tangguh project signed an agreement for to supply 121 Bcf/year of LNG for the proposed Chinese LNG terminal, Fujian, for a 25-year period. BG also is developing the Pipavav LNG import project on the west coast of India.

In Bolivia, BG and partners have formed Pacific LNG which is seeking to produce and sell gas from the Margarita field to the west coast of the United States. The project would include a liquefaction plant on the Pacific coast in California.

Last month, BG also extended an existing agreement with the National Iranian Gas Export Co. to participate in a proposed Iranian LNG liquefaction plant. This facility has the potential to be a further source of competitively priced LNG for BG’s growing LNG business.

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