BG Group strategy going forward will be to run with a simplified organization while improving operations and portfolio management. Exploration is at the “heart” of what BG Group does, Group CEO Chris Finlayson said last week. But global liquefied natural gas (LNG) also is crucial to growth, he said.
On the exploration side, BG Group has had 15 “giant discoveries” in 15 years. It is currently exploring and appraising five new basins and plans to add five new basins to its global portfolio over five years, Finlayson said. “BG Group is a great company with a strong pipeline of projects and deep-set skills and expertise that differentiate us, particularly in exploration and LNG,” Finlayson said during an investor presentation. “We are big enough to explore the best frontier acreage but small enough to be agile — valuable attributes, which I intend to keep.
“In a period where LNG demand is expected to grow twice as fast as overall gas demand, with underlying supply needing to grow by nearly 9% to meet total demand, BG Group is well positioned to capitalize on this growing market through our competitive advantages of world-class exploration and a distinctive LNG business, facilitated by our commercial agility.”
UK-based BG Group has struggled lately, failing to meet production expectations and has battled cost overruns on liquefied natural gas (LNG) development in Australia. The second quarter of last year also saw the company take a $1.3 billion post-tax charge against its shale assets in the United States due to weak natural gas prices (see NGI, July 30, 2012). Finlayson said the company is making “good progress” on its Queensland Curtis LNG (QCLNG) project in Australia, in which China National Oil Corp. (CNOOC) recently increased its stake (see NGI, May 13). BG Group said it will be China’s largest supplier of LNG. The company has now supplied LNG to 23 of the 27 countries that import LNG, Finlayson told investors.
The BG Group LNG model is predicated on flexibility to respond to market changes, Finlayson said. Most of BG Group’s LNG supply is contracted directly to the company and most of its market contracts can be supplied from any of its LNG sources, allowing the company to optimize supply and market relationships in order to increase margins, Finlayson said. BG Group has 25 LNG tankers, either owned or leased, giving it one of the largest fleets in the industry, he said.
In addition to having new LNG supply contracted from Cheniere Energy’s Sabine Pass liquefaction terminal currently in development, and equity supply from QCLNG, BG Group also has a liquefaction and export project in the works for British Columbia (see NGI, Sept. 17, 2012) and is involved with a project in development for Lake Charles, LA, Finlayson told investors. BG Group would be the main customer of the Lake Charles facility but would not be contributing capital to the project, he said. Additionally, the company is working on site selection for an LNG project in Tanzania and has the potential to develop a third train at QCLNG, in which CNOOC has an option to take a 25% stake.
“We are currently advancing all of these projects, but we may not take them all to sanction or participate in all of them at current equity levels…” Finlayson said.
Among the key’s to BG Group’s overall strategy, Finlayson said, is focusing on areas of “distinctive competitive advantage” in the upstream and in LNG. Over the next three years BG Group plans to spend $1.8 billion per year on exploration, a 50% increase over 2012, along the way managing its assets more actively and monetizing those or bringing in partners to accelerate payback, he said. Going forward, the company’s portfolio will be focused on “10-15 high-quality, material assets.”
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