BG unveils £12bn expansion plan to offset North Sea gas decline

BG Group has unveiled aggressive production targets and a £12bn investment programme, as it smashed City profit forecasts for last year.

The company's shares shot by 9 per cent to 675p, as it lifted the full-year dividend by 57 per cent. Net profits for 2005 jumped by 64 per cent to £1.4bn, benefiting from booming prices, as the fourth quarter turned out to be much stronger than analysts expected. Without the price gains, profit growth would have been 17 per cent.

BG announced that it would be investing £4.8bn over the 2007-2009 period on new and existing projects. Investment in 2010-2012 is expected to be at least £6bn-£7bn.

BG is targeting production growth of between 6 and 10 per cent between now and 2012, which is well above of rivals. Its LNG business will grow by 28 per cent a year up to 2009. The projects involved include further development of the Karachaganak field in Kazakhstan, Bongkot South in Thailand and OK LNG in Nigeria.

Last year the company produced 504,000 barrels of oil equivalent a day, which will be boosted to 600,000 boepd this year.

"We have a distinctive strategy and portfolio, a 10-year record of delivery and plans to sustain our growth," Mr Chapman said.

BG said that the UK will be importing nearly 80 per cent of its gas within a decade. The company has a 16 per cent in the Interconnector pipe that brings gas from Continental Europe to the UK. The working of the Interconnector is under investigation by the European Commission, after it emerged that it was running at 60 to 75 per cent of capacity, despite gas shortages in the UK.

Mr Chapman stated "loudly and clearly" that BG's capacity on the Interconnector has been fully used over the winter.

The company said that by 2015, the UK would be importing around 100 billion cubic metres of gas a year, out of a total predicted consumption of some 130 bcm. Frank Chapman, the chief executive, said however that business would respond by providing the additional gas from other parts of the world.

"It is very clear that the market is working. Higher price signals will mean investment in more pipelines, offshore facilities, exploration and LNG [liquefied natural gas]," Mr Chapman said.

Declining production from the North Sea has meant that Britain has become a net importer of gas. However, North Sea operators were hit by additional taxes in the Pre-Budget Report at the end of last year, which, for instance, will cost BG at extra £70m in 2006.

Scottish Power's energy prices set to rise

Scottish Power has became the latest domestic gas and electricity supplier to announce that it will be putting up prices.

From 1 March, its gas prices will jump by 15 per cent and electricity prices will rise by 8 per cent. Scottish Power has now raised their gas prices by 51 per cent since 2003 and its gas prices are now the highest in Britain, according to consumer group Energywatch.

That means an average gas bill from Scottish Power is now more than £500. In recent days, there have been unconfirmed reports that British Gas is about to put through a 25 per cent increase in bills.