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BG chief becomes one of UK’s best-paid bosses with £11m deal home

• Frank Chapman’s basic salary rises 26% to £3m 
• Group’s shares are up by 240% over three years

  • The Guardian, Monday 6 April 2009

The pay package of Frank Chapman, the chief executive of BG Group, totalled £10.9m last year, making him one of Britain’s best-paid bosses.

The huge salary, revealed in the energy group’s accounts, appears to fly in the face of increasing pressure on company bosses to show restraint while unemployment rises sharply and wide-ranging pay freezes are imposed on many British workers.

Chapman’s basic salary rose by 26.2% to £3m. In addition he pocketed the maximum possible award of 673,768 shares under the company’s long-term, performance-based incentive scheme. Those shares are valued at £7.3m. The energy boss also received a pension top-up worth £678,000.

As the economy contracts, surveys suggest that two-thirds of bosses at the UK’s largest companies will freeze their salaries this year. But this does not include individual performance bonus schemes, which many executives set themselves despite demanding their workforce accept a pay freeze.

Chapman’s pay award easily eclipses Tony Hayward at BP and Royal Dutch Shell’s outgoing chief executive, Jeroen van der Veer, who have endured difficult years.

Pay became an issue at last week’s G20 summit of world leaders, where it was decided that bankers’ pay and bonuses must reflect the riskiness of investments, making it tougher for financiers to pocket huge cash bonuses for high-risk bets.

Despite difficult economic conditions and a sharp fall in commodity prices, BG will argue that under Chapman, 55, the company’s three-year share price rose 240%, helped by bumper profits and new oil discoveries. In fact, BG’s 2008 earnings beat analysts’ expectations following astute negotiations supervised by Chapman, which saw BG achieve high margins in its liquefied natural gas (LNG) business thanks to the signing of long-term supply contracts at the top of the market.

BG was also buoyed last year by an “outstanding exploration success” in Brazil where with its partner Petroleo Brasileiro it made multibillion-barrel oil discoveries. Between 2005 and 2008, BG more than doubled its operating profit and added more than 6bn barrels to its resource base and increased daily production by two-thirds.

Chapman is positioning BG to become a leading force in the current wave of consolidation within the oil and gas industry as falling commodity prices leave the balance sheets of smaller energy firms more vulnerable to takeover. Last month BG bought Australia’s Pure Energy for £485m. It was also reportedly a surprise bidder for Oranje Nassau, the £500m North Sea oil producer put up for sale by France’s Wendel family.

Chapman was appointed chief executive of BG in 2000, having joined British Gas four years previously as managing director in charge of exploration and production. An engineer by training, he has worked in the oil and gas industry for 34 years. Prior to joining the group, he spent 22 years with Shell and BP. Under Chapman, BG has enjoyed 10 consecutive quarters of consensus-beating numbers, recently making profits 15% ahead of expectations. The best-performing sector within the company is its LNG operations. Operating profits in this sector soared by 204% to £1.59bn.

Chapman said he expected the energy company would leapfrog BP and Total to become the world’s third-largest producer of LNG by 2015, but still lagging behind Exxon and Shell.

When the gas is liquefied, by pressurisation and cooling to about -160C, it can be transported on ships to customers, irrespective of whether a pipeline is in place or not. The company expects global LNG production to more than double to about 400m tonnes a year by 2020, with nearly 70m tonnes of new capacity delivered by 2011.


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