BG Group Celebrates More Success in Africa

LONDON -- It's been a pretty torrid 12 months for BG Group  (LSE: BG  ) (NASDAQOTH: BRGYY  ) , with falling production forecasts knocking some 25% of its share price. But at least things appear to going swimmingly for the company in offshore Tanzania.

This morning, BG Group announced a successful well test at Mzia-2, which flowed at 57 million standard cubic feet of natural gas per day, constrained by testing equipment. This follows another successful test, which produced 70 million cubic feet per day, at the nearby Jodari-1 well in March of this year.

BG has a 60% interest in three blocks in offshore Tanzania, having farmed into the area in 2010. London-listed oil explorer Ophir Energy  (LSE: OPHR  ) still retains its 40% interest in all three blocks, as well as two others located nearby.

BG Group chief executive Chris Finlayson said: "Results from the current campaign demonstrate the excellent quality of our interests offshore Tanzania, where our resources, and those of other participants in the region, are helping support plans for a multi-train LNG export project. While we continue exploration and appraisal offshore, BG Group and others are jointly studying suitable sites for a potential onshore LNG terminal and anticipate providing proposed locations to the Tanzania Government in the next few months".

This area has produced seven consecutive natural gas discoveries for BG and Ophir, and the companies will use the data collected from recent appraisal wells, plus a 3-D seismic survey, to map out another exploration program that will start later this year. BG will be hoping it can add to the 10 trillion cubic feet of gross total resources identified so far.

Investors will have a better idea of how Tanzania fits into BG's plans when it releases its first-quarter figures tomorrow. That said, there's a lot of work to be done before this area can materially contribute to BG's production figures.

In the presentation following the company 2012's results, Finlayson highlighted the fact that BG is "working in a country which has got a very undeveloped infrastructure and a very undeveloped civic capacity to absorb major investments... it means engaging not just the current government, it means engaging civic society, the opposition, NGOs to make sure that you build a consensus for your project."

BG shares were unchanged at 1,084 pence following this news, but Ophir Energy was in a more buoyant mood. Being a much smaller company, valued at £2.4 billion, its shares put on 2% to 416 pence.

BG is one of two shares featured in this special free report from The Motley Fool. In it, we set out the factors you need to consider before buying into this sector and what to look out for when picking individual shares.

You can download your copy of this free report right here.


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