LONDON: International gas and oil producer BG Group Plc said civil unrest and leadership change in Egypt had led it to review further investments in the country, as it reported a 3 percent fall in second quarter net profit.
The UK-based international gas producer depends on Egypt for about a fifth of its production - a source of revenue for its expensive new projects in Brazil and Australia.
But its offshore Egyptian reservoirs are suffering decline, and the country is gearing up to consume more gas at home, increasing the possibility that BG might have to shut part of its two Liquefied Natural Gas (LNG) export operations there.
Meanwhile, the ousting of President Mohammed Mursi by the military earlier this month and the fact BG is owed $1.3bn by Egypt for domestic gas sales — up from $1.2bn in the first quarter — have heightened the company’s anxiety about investing in the country.
“Events in Egypt remain a primary concern and will continue to be so as the political, social and business environment evolves,” said BG chief executive Chris Finlayson in a results statement yesterday.
“While our offshore operations continue unaffected, higher than agreed gas volumes were diverted into the Egyptian domestic market during the quarter, impacting volumes available for LNG export,” he said.
The wider civil unrest has made BG reduce its expatriate personnel, including contractors and family members, in Egypt from around 150 to 55, the CEO told analysts. But its projects continue to operate normally, the company said. Future investments in the country remain less certain.
“Given the current situation in Egypt, the Group’s investment programme is under continuous review,” the company said in its statement.
BG’s second quarter net profit dropped to $986m, beating expectations of $963m and driven by higher than expected production and good profit margins in the new barrels coming onstream in Brazil.
BG shares were up 0.34 percent at 1226 GMT having fallen 4.6 percent over the last 12 months.
BG is working to raise flagging production in its Egyptian fields, but in the second quarter, more gas was diverted to Egypt’s domestic market, reaching a maximum pipeline capacity of 900 million cubic feet a day (mmscfd) up from 700 million mmscfd in the first quarter, and resulting in reduced supplies for its LNG export operation. Reuters
