BG said that its LNG total operating profit for the nine months ended September was $2 173 million, 25% higher than last year as a result of favourable market conditions, with continuing strong demand for cargo deliveries, particularly from Japan.
BG Group delivered 90% of cargoes (2011 86%) to global markets outside the USA including 92 to Asia, 34 to South America and 7 to Europe (2011 76 Asia, 35 South America and 21 Europe).
Deliveries to Japan increased from 24 to 52, reflecting record demand as all nuclear units were offline by the end of the second quarter, only two of which are back online to date.
BG Group’s share of operating profit from liquefaction activities increased by 4% to $258 million.
Capital investment on a cash basis of $1 955 million was primarily associated with the development of the QCLNG project.
BG Group’s Chief Executive, Sir Frank Chapman said: “BG Group produced strong third quarter financial results across the business. We achieved good cost and schedule performance on key projects in Australia and Brazil and reached further asset sales agreements placing us well ahead of our capital release plan.
“Earnings for the third quarter increased 16% to $1.2 billion, driven by a 13% rise in E&P operating profit to $1.3 billion and a continued robust performance of the LNG business, where operating profit was up 24% to $767 million.
“Production rose by some 5% as new projects ramped up, but was held back by the previously announced shutdown of the non-operated Elgin/Franklin field and our earlier decision to scale back drilling in the USA due to low natural gas prices. As a result of these factors, along with the deferral of the Jasmine start-up to 2013, production growth in 2012 of some 3% is now forecast.
“Alongside these factors, which will continue to affect production in 2013, we have adjusted our 2013 plans to accommodate an extended sub-sea tie-in schedule for Brazil’s Sapinhoá and Lula NE wells. We have also reflected lower production in Egypt where the Phase 7 compression project has been less effective than expected in arresting reservoir decline. In aggregate, these factors are expected to result in 2013 volumes being broadly in line with 2012.
“Looking ahead, our growth projects continue with the planned installation in Brazil of the two new FPSOs in 2013. This will be followed in 2014 by the installation of two further FPSOs in Brazil and the start-up of QCLNG in Australia. We also progressed the six further FPSOs planned to come onstream in Brazil in 2015 and 2016. The BM-S-9 partners intend to tender for a further FPSO for Carioca, which will bring to 15 the total number of FPSOs to be deployed on the ‘big-five’ Santos Basin discoveries.”
Sir Frank commented: “Critical to our investment proposition is the delivery of our Australia and Brazil ventures. These projects will deliver unit earnings substantially higher than the current Group average, which alongside the growing contribution from the expanding LNG business, will result in Group earnings growing considerably faster than upstream production.
“In Australia, we continued to make good progress with our Queensland Curtis LNG project, keeping it on track for first LNG in 2014. We now have contracts and other agreements in place for more than 90% of the project scope to 2014, and we reconfirm the $20.4 billion capital budget. In the upstream, 135 wells were drilled in the quarter, a 71% increase on the second quarter. Construction of the pipeline infrastructure continues, with the gas collection header system and more than 50% of the gas export pipeline now welded. On Curtis Island, the construction of the LNG plant continues on track, with the first pre-fabricated modules from Thailand being installed.”
Sir Frank added: “In Brazil, drilling momentum continues with up to 11 drilling rigs operating simultaneously. Drilling costs, which account for some 50% of project capex, have continued to fall as average drilling durations this year have fallen to 75 days, with the best well taking just 43 days. The prospect of continued drilling cost reductions in the future is highlighted by the best composite well duration of just 34 days.
“Additionally, contracts are in place for 90% of the next four leased and eight locally purchased FPSOs and costs are tracking on or under budget. Falling drilling durations and the confirmation of costs for FPSOs and other capital scope reconfirms the developments’ very low unit costs. The conversion of the two FPSOs scheduled for 2013 start-up continued on track. These units will more than triple gross production capacity from around 130 000 boed to 430 000 boed. Production will ramp up as wells are connected, until plateau is reached in 2014 and 2015.
“In the quarter, we received independent certification from Miller and Lents of the reserves and resources within our ‘big-five’ Santos Basin discoveries. This confirmed our view of both the mean reserves and resources of 6 billion boe and the upside case of 8 billion boe respectively, net to BG Group.”
On the portfolio rationalisation programme, Sir Frank said: “Our agreement today to sell an interest in part of the QCLNG project to CNOOC means that we have now completed or reached asset sales agreements that should release a total of $7.6 billion of capital by mid-2013, with a material benefit to the Group’s balance sheet.”
On the Group’s exploration programme, he noted: “The Papa-1 discovery in Block 3 produced our sixth consecutive exploration success offshore Tanzania. We currently estimate gross recoverable resources discovered to date to be near 10 tcf with extensive further potential to be explored.
“Elsewhere, exploration of other high potential prospects continued in Australia, Brazil and Egypt. In Kenya, seismic activity identified significant prospectivity in multiple gas and oil prone plays and future opportunities were added to our portfolio offshore Uruguay and India.”
In conclusion, Sir Frank said: “During the quarter, BG Group produced good financial results, advanced the execution of our key growth projects within our capital cost estimates and reached agreements that will release substantially more capital earlier than planned. We also delivered exploration success while securing new exploration potential for the future.”
LNG World News Staff, October 31, 2012