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BG Group and Petrobras Joint Santos Basin Gas Development

BG Logo BG Group today announced the signing of a Joint Venture Agreement (JVA) with the Brazilian oil company Petróleo Brasileiro SA (Petrobras) focused on developing Floating Liquefied Natural Gas (FLNG) as an additional option to commercialise the material associated natural gas reserves in the Santos Basin pre-salt, offshore Brazil.

Under the agreement, Front-End Engineering and Design (FEED) contracts will be awarded for a new FLNG vessel.

This FLNG vessel will operate close to the planned Santos Basin Floating Production, Storage and Off-Loading (FPSO) vessels. The vessel will process and liquefy the associated natural gas from the pre-salt fields before offloading to LNG ships.

The FLNG processing capacity is anticipated to be up to 14 million cubic metres per day of associated gas. The 3.0 million tonnes per annum (mtpa) LNG produced would be shipped either to Petrobras-operated regasification terminals at Pecém and Guanabara Bay to supply the Brazilian domestic market or exported to other global markets. BG Group is a significant participant in the Brazilian domestic market, holding a majority interest (60.1%) in Comgás, Brazil's largest gas distribution company. In 2008, Comgás supplied gas to 1 000 industrial, 9 000 commercial and 650 000 residential customers in São Paulo state. Average daily volumes increased almost five-fold between 1999 and 2008, from 3.0 million cubic metres per day (mmcmd) to 14.6 mmcmd.

BG Group supplies customers in 20 LNG importing countries worldwide, with a flexible global supply portfolio, a fleet of modern ships and international commercial and logistical capabilities. Petrobras operates 22% of the global deep waters oil production and holds the world's largest number of offshore production units (FPS and ships).

Indicative timeline
The tender for the development of the FLNG FEED project was issued in August 2009. In October 2009, several consortia consisting of international suppliers with liquefaction and FPSO construction experience were invited to present their initial proposals.

In December 2009, FEED contracts will be awarded to up to three of the consortia invited to bid, in accordance with the qualification criteria established for the tender process. The decision to develop separate FEED projects in parallel is intended to foster competition between the consortia, contributing to a reduction in the overall cost of the FLNG vessel.

The successful bidders will prepare their FEED proposals through 2010. BG Group and Petrobras anticipate making the Final Investment Decision (FID) in 2011. The FID outcome will be based on technical and economic feasibility studies of each of the FLNG FEED projects presented. It will also take into account an assessment of the viability of alternative development options such as the installation of new subsea pipelines connecting the Santos Basin pre-salt to onshore gas processing facilities.

BG Group has interests in five concessions in the deep water Santos Basin: BM-S-9, 10, 11 and 50, which are operated by Petrobras; and BM-S-52, which is operated by BG Group.

BG Group also holds an operated interest in the BM-S-47 concession in the shallow water Santos Basin and holds one onshore concession (BT-SF-2) in the Sao Francisco Basin in Minas Gerais State.

Published 17/11/09

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