No return to cheap gas:
BG warned gas users yesterday that they face an uncertain winter and should not expect prices to fall in the longer term to the cheaper levels seen more than two years ago despite new supplies. The company, spun out of the state-owned British Gas stable in the late 1990s, said it was doing all it could to increase the UK's energy security - including trying to find new offshore fields in Norwegian waters and piping gas straight back to Britain. A raft of new discoveries in the North Sea has convinced the exploration and production company that there are still plenty of opportunities left off Britain. BG is also building up its liquefied natural gas capabilities and is in talks with Russia's Gazprom, the biggest gas supplier in the world, about buying LNG from new fields such as Shtokman in the Barents Sea. The revelations came as BG unveiled an 11% increase in net profits over the third quarter to £342m, helped by a 23% increase in production due to new fields in the UK North Sea and Trinidad. Frank Chapman, BG's chief executive, was reluctant to predict what would happen to prices this winter, saying it would be "very much a function of the weather". He suspected they may not be as high as last year but in the long term "gas prices in the UK are going to have to go up" because Britain has become a net importer with the rundown of North Sea supplies. BG has itself agreed a big jump - from 26p to 31p a therm - in the average price at which it sells its UK gas on fixed contracts for the year beginning October 1. BG is a provider of wholesale gas and does not supply householders directly in the way British Gas does. BG says it is spending almost £2bn in Britain including cash to upgrade the Interconnector pipeline from the continent, in which it owns a 25% stake, building an LNG terminal in south Wales and developing fields such as Buzzard. Mr Chapman insisted that the talks with Gazprom were not connected with any equity merger or takeover but confined to ways BG could distribute LNG for Gazprom, which is a newcomer to this energy field. BG said it was delighted at its five exploration successes in the UK North Sea, including the Jasmine field it hopes to develop next year. The company is exploring just over the median line with Norway after the inter-governmental Frigg Treaty, which allows Norwegian oil and gas to be piped ashore straight to the UK. 6.11.06