The Guardian (UK): Gas price fuels 44% BG profits rise

The Guardian (UK): Gas price fuels 44% BG profits rise

Terry Macalister

Wednesday May 11, 2005

BG, the gas exploration and production group, reported a 44% increase in first quarter profits yesterday, partly on the back of higher gas prices, but dismissed suggestions that it was responsible for soaring domestic energy costs.

Frank Chapman, chief executive of BG, warned that gas prices for retail and industrial customers in Britain would remain high for the foreseeable future as imports gradually took over from North Sea supplies.

Centrica, the energy supplier, which like BG was spun out of the old British Gas, upset consumer groups on Monday when it said that it could be forced to increase domestic fuel prices later this year – on top of the two rises it introduced in 2004.

Centrica said it had to consider these moves because wholesale prices for next winter were already 25% higher than they had been in February and 40% above last December’s level.

BG said its £483m operating profit – compared with a City consensus of £476m – was won off the back of increased production as well as higher wholesale oil and gas prices.

While Shell and even ExxonMobil saw a decline in their first quarter output, BG’s production rose 7% on the same quarter last year to reach 43.7m barrels of oil equivalents.

Asked whether the company should ultimately take some of the heat for growing consumer pain on the energy front, Mr Chapman said: “It’s not our responsibility. Our gas price earnings increased by 9%.”

The liberalisation of the gas market by the government had ultimately served all market segments “very well” and UK gas prices had been “significantly” lower than Continental Europe, he added.

What was happening in Britain was that the UK gas reserve base and production volumes had been going down. “We are going to have to import gas and there will be upward pressure on prices,” Mr Chapman said. BG said that by 2015 there would be a need to import as much gas – 100bn cubic metres a year – as Britain was consuming in total today. The company was working to offset any supply shortages both by investing in its Dragon LNG plant in south Wales and by continuing to apply for new exploration licences in the North Sea. BG has plenty of cash for investing in new projects including an expected $1.5bn (£800m) from the disposal of its stake in the Kashagan oil field in the Caspian Sea. Ashley Almanza, BG’s financial director, insisted the company would not go on an acquisition spree, saying it had plenty of organic growth prospects to work on.

http://www.guardian.co.uk/business/story/0,,1480859,00.html

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