The Integrated Gas Major

1
The Integrated Gas Major
Sean Sutcliffe Executive Vice President

• 21st January 2003

2
Legal Notice
The following presentation includes
"forward-looking information" within the meaning
of Section 27A of the US Securities Act of 1933,
as amended, and Section 21E of the US Securities
Exchange Act of 1934, as amended. Certain
statements included in this presentation,
including without limitation those concerning (i)
BG Group's strategy, outlook and growth
opportunities (ii) the 2003 and 2006 long term
growth targets including certain financial
targets (iii) cost targets (iv) the projects
expected to contribute to the fulfillment of the
growth targets (v) commercialisation and project
delivery activities (vi) BG Group's positioning
to deliver its future plans and to realise its
potential for growth (vii) future reserves
(viii) the economic outlook for the gas and oil
industries (ix) demand for gas as a source of
energy and (x) statements preceded by
believes, expects, anticipates, plans,
intends or similar expressions, contain certain
forward-looking information concerning BG Group's
operations, economic performance and financial
performance. Although BG Group believes that the
expectations reflected in such forward-looking
statements are reasonable, no assurance can be
given that such expectations will prove to have
been correct. Accordingly, results could differ
materially from those set out in the forward
looking statements, as a result of, among other
factors (i) changes in economic, market and
competitive conditions, including oil and gas
prices (ii) success in implementing business and
operating initiatives (iii) changes in the
regulatory environment and other government
actions, including UK and international
corporation tax rates (iv) the failure to ensure
the safe operation of BG Group's assets
worldwide (v) implementation risk, being the
challenges associated with delivering capital
intensive projects on time and on budget,
including the need to retain and motivate staff
(vi) commodity risk, being the risk of
significant fluctuations in gas and/or oil prices
from those assumed (vii) a major recession or
significant upheaval in the major markets in
which BG Group operates (viii) risks encountered
in the gas and oil exploration and production
sector in general (ix) fluctuations in exchange
rates (x) business risk management and (xi) the
Risk Factors included in BG Group's Annual Report
and Accounts 2001.   This presentation does not
constitute or contain, and shall not be taken to
constitute or contain, an invitation or
inducement to any person to underwrite, subscribe
for, otherwise acquire, or dispose of or invest
in BG Group plc or any other entity, nor does it
advise any person to do any of the foregoing.
3
BG Group Introduction

• Strategy
• Skills and capabilities
• Organisation
• Capital allocation
• Summary

4
StrategyBusiness model
Markets
Enabling
Resources
Delivering exceptional value to shareholders
5
StrategyBusiness balance
Upstream/downstream Estimated capex
Oil/Gas Estimated capex
Source Deutsche Bank, 2001-2006E capex
Similar upstream/downstream balance but BG focus
on gas
6
Skills and capabilities BG at work

• Outstanding technical skills
• Commercial ability for complex gas projects
• Experts in project delivery
• Partner of choice
• Deep understanding of gas markets

Key competitive advantages
7
OrganisationBG Group Executive team
Emma Nichol Company Secretary
Bill Friedrich Deputy Chief Executive
Frank Chapman Chief Executive
Ashley Almanza Chief Financial Officer
Peter Duffy EVP Human Resources
David McManus EVP Skill Centres
Sean Sutcliffe EVP New Businesses
Martin Houston EVP Atlantic, Europe and Med.
Basin
Rick Waddell EVP South America
Jon Wormley EVP UK
Dave Roberts EVP Eastern Hemisphere
Charles Bland EVP Policy and Corporate Affairs
Internationally resourced with breadth of
experience
8
Capital allocationApproval Committees
Board
gt50mm
Strategic and policy issues
Group Executive Committee
Business Development Committee
Energy Trading Risk Management
Investment Committee
Exploration Committee
Other
Governance Policy and Risk HSSE
lt50mm Funding of new opportunities
Management of Approved budget
Management of Approved budget

Flexibility in control
9
Capital allocation Reviews and processes

• Board Planning Conference
• Portfolio review
• Opportunity screening
• Budget process
• Business Improvement Plans

Operate on annual cycle
10
Capital allocation Investment criteria

• Hurdle rates and returns
• Materiality and value adding
• Strategic fit
• Segmental balance
• Political risk

Broad based justification and fit
11
Capital allocationHurdle rates and economic
returns

• Upstream RROR of 15 at mid cycle prices
• Upstream has to make 8 RROR at 10 oil price
• Downstream RROR of 8 before project financing
• No cross subsidies between business segments
• Strict investment discipline will drive financial
  returns

Improving returns coupled with strong growth
12
Capital allocationOptions beyond 2006
Norway Gas
White Zone/ Faroes
Karachaganak Gas
Brindisi LNG
Caspian/Kalamkas
Kashagan expansion
UK DCHP
WDD gas
Italy exploration
US
Iran LNG
Spain exploration
Gujarat Gas
Trinidad gas
Jugurtha
Pipavav LNG
Gazagas
Barca expansion
Philippines TD
ALNG 5
Philippines LNG
Egyptian LNG 3
Pacific LNG
Tangguh
Comgas
India
Sucat
Margarita/ Itau to Brazil
Brazil exploration
Thailand/ Cambodia JDA
Mahanagar Gas
EP
LNG
Power
TD
New Business
Extending the growth
13
Capital allocation Funnel stages and approval
gates
Screening stage
Pre Development
Development
Production
ALNG T3
Comgas
Sucat IPP
Brindisi

Many checks and balances
14
Capital allocation Ranked prospect inventory
example
EMV
EMV - Expected Monetary Value
Strong inventory
15
Capital allocation Exploration well budget
example
Scenario 1 Value
Scenario 2 Write Off
Scenario 3 Inv Grade
Scenario 4 Obligation
Scenario 5 Gas
Scenario 6 Production
Well
A B C D E F G H I J K L M N O P Q R S T U V W X
Multiple factors in decision making
16
The Integrated Gas MajorSummary

• Clear strategic direction
• Strategy and resource allocation linkages
• Extending the trajectory on growth and returns

Balance of value creation and risk