Cheaper Gas Bills
In this recent excerpt for the Times Newspaper the reporter went on to say that UK households will benefit from falling gas prices this winter (2009), said Frank Chapman, chief executive of BG Group, the international gas producer which today cut its production targets in response to falling demand for fuel.
Recession sent the US gas price tumbling by two thirds and the oil price by half during the period, a reduction in income for BG which overshadowed a 7 per cent boost in the company’s oil and gas production in the second quarter.
Plunging gas demand and a global glut of liquefied natural gas (LNG) has forced BG to push back its output target of 680,000 barrels of oil and gas per day by three months to the year ending March 21, 2010.
As a result, BG’s earnings fell by a almost a third to £513 million in the three months to June 30. However, company is boosting the dividend by a fifth 5.62p per share. BG stock initially fell on the 2009 production setback as analysts speculated that BG’s long run of production growth might become derailed by the recession.
Jason Kenny, ING analyst, said: “The cracks are beginning to appear and maybe investors should factor in 6 per cent rather than 8 per cent (in the) medium term at least,” he said.
Others remained optimistic, pointing to the company’s reassurance that long-term targets were unchanged and the huge boost expected from BG’s stake in supergiant oilfields in Brazil.
Mr Chapman said that the UK would benefit from the falling gas price as it was one of only two countries, the other being the US, in which the gas market was fully open to competition and not linked by long-term contracts to oil indices.
He said: “Britain will tend to have its gas price determined by global pricing. Gas prices are coming down because the market is working and supply is abundant. UK consumers will see the advantage of that.”
In July, the first cargo of LNG was delivered to Dragon LNG, the regasification terminal in Wales which is 50 per cent owned by BG.
Hedging contracts enabled BG to lock in profit margin for its LNG trading business which buys LNG and ships it to utility customers in Europe and North America. Even so, LNG trading suffered a 15 per cent fall in profits to £311 million in the second quarter. Upstream, operating profits fell by 50 per cent due to the decline in oil and gas prices. Mr Chapman said BG would retain its long-term production growth target of 6-8 per cent per annum despite the setback in the current year caused by the slump in demand.
In Brazil, were BG is a partner with Petrobras on the giant Tupi discovery, Mr Chapman said that the floating platform for the deepwater offshore oilfield is one third complete and the first phase of the project will start production at the end of 2010. Tupi’s first phase is expected to produce 100,000 barrels per day.
