BG Group is Common Thread in Pipelines Binding Mercosur Countries

---

Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Petrobras, the Brazilian state oil company, has for the first time assigned capacity to a third party independent for a portion of the carrying capacity of its Transportadora Brasiliera Gasuduto (TBG) Pipeline, which transports gas from Bolivia to Brazil. BG Group (LSE:BG) (Reading, United Kingdom) and and Petrobras have signed the agreement to assign a proportion of Petrobas's 30 million cubic meters a day of firm capacity and will allow BG to continue to supply the growing gas market in the Comgas area.

Comgas, in which BG holds a 60.5% interest, is the largest gas distribution company in the state of Sao Paulo. BG is contracted to supply 650,000 cubic meters day, produced from its 100% owned La Vertiente field in Bolivia from 2003 to 2011. The gas will be sold to Comgas principally for use in the industrial and cogeneration sectors.

BG has built a significant position in the southern cone through the gas chain and the fast developing natural gas market. The group has exploration acreage in Brazil, and both exploration and production interests in Bolivia from where both the local and export markets are served. The Bolivia-Brazil pipeline, in which BG has an equity holding, opened up Brazil as a market for BG's Bolivian gas reserves. In April 2001, the Brazilian regulator awarded BG firm capacity rights in the Bolivia-Brazil pipeline until December 2002. This allowed BG to deliver equity gas from its wholly owned Bolivian properties, thus completing an integrated gas chain.

BG also has a 40% stake in the $160 million Gasoducto Cruz del Sur (Southern Cross) pipeline, which was commissioned late last year. This pipeline transports gas under the River Plate from Argentina to Montevideo, Uruguay.

The main customer, for Argentine natural gas in Uruguay, is UTE (the state electricity utility), which will burn gas in its Motevideo power plant. Gazeba, the capital's local distribution company, and CONECTA, the distribution company for the rest of the country are also expected to become customers, reducing their current dependence on manufactured gas and LPG. UTE has entered into a long-term agreement with Pan American/Wintershall for gas to be supplied from their Argentine reserves. BG's partners in the pipeline are Pan American Energy (30%) (Buenos Aries, Argentina), ANCAP, the Uruguayan hydrocarbon company (20%), and Wintershall (10%). The pipeline operates under a 30-year concession agreement awarded by the Uruguayan government in 1999.

The Southern Cross pipeline concession covers a possible extension from Uruguay to the Brazilian border, in order to supply the possible markets in southern Brazil. A number of marketing and technical studies have been completed, but are on hold pending greater market definition and development.

The Southern Cross pipeline has 193 kilometers of 24/18-inch high pressure trunk line with a capacity of carrying around 5 million cubic meters a day. 55 kilometers of it crosses the River Plate with the remaining length onshore in Uruguay. The facilities also include approximately 200 kilometers of low pressure laterals, and 28 above ground installations.

A separate $18 million, 40 kilometer, 18 inch pipeline, the gasLink, was completed early last year to connect the start of the Southern Cross pipeline in Argentina with the national grid which is operated by Transportadora de Gas del Sur (TGS). This line is owned 51% by Dinarel and 49% by TGS. BG has an indirect 25.5% participation in the Link by reason of its 50% ownership of Dinarel.

Another scheme under consideration will see gas from BG's Bolivian gas fields, where the company is the second largest holder of reserves, to a liquefaction facility on the Pacific coast and then shipped to the North American Market.