Vous êtes sur la page 1sur 64

78

Financial statements Annual Report and Accounts 2010

Independent Auditors report to the members of BG Group plc


We have audited the Financial Statements of BG Group plc for the year ended 31December 2010 which comprise, the Consolidated income statement, the Consolidated statement of comprehensive income, the Group and parent Company Balance sheets, the Group and parent Company Statements of changes in equity, the Group and parent Company Cash flow statements, the Principal accounting policies and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union and, as regards the parent Company Financial Statements, as applied in accordance with the provisions of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006


In our opinion:

the part of the Remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and the information given in the Directors report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements.

Matters on which we are required to report by exception


We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion:

Respective responsibilities of directors and auditors


As explained more fully in the Statement of Directors responsibilities for preparing the Financial Statements set out on page 75, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Boards Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Companys members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the parent Company Financial Statements and the part of the Remuneration report to be audited are not in agreement with the accounting records and returns; or certain disclosures of Directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

Scope of the audit of the Financial Statements


An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material mis-statement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Groups and the parent Companys circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements.

the Directors statement, set out on page 75, in relation to going concern; the parts of the Corporate governance section of the Directors report relating to the Companys compliance with the nine provisions of the June 2008 Combined Code specified for our review; and certain elements of the report to shareholders by the Board on Directors remuneration.

Nicholas Blackwood (Senior Statutory Auditor)


for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 11 March 2011

Opinion on Financial Statements


In our opinion:

the Financial Statements give a true and fair view of the state of the Groups and of the parent Companys affairs as at 31December 2010 and of the Groups profit and Groups and parent Companys cash flows for the year then ended; the Group Financial Statements have been properly prepared in accordance with IFRS as adopted by the European Union; the parent Company Financial Statements have been properly prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the lAS Regulation.

www.bg-group.com

BG Group A year of delivery

79

Principal accounting policies


BASIS OF PREPARATION
The Financial Statements for the year ended 31December 2010 have been prepared in accordance with International Financial Reporting Standards (IFRS), and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union. In addition, the Financial Statements have been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared primarily using historical cost principles except that, as disclosed in the accounting policies below, certain items, including derivatives, are measured at fair value. The preparation of Financial Statements in conformity with IFRS requires management to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the Financial Statements and the reported revenues and expenses during the reporting period. Actual results could differ from these estimates. BG Group believes that the accounting policies associated with exploration expenditure, depreciation, decommissioning, impairments, financial instruments including commodity contracts, and revenue recognition are the policies where changes in estimates and assumptions could have a significant impact on the Financial Statements. Further discussion on these policies, estimates and judgements can be found in the Financial review, pages 27 to 33; note 5, page 102; note 11, page 106; and note 20, page 113. The presentation adopted by the Group for its results under IFRS is explained in note 2, page 91.

SEGMENT REPORTING
BG Groups reportable segments are operating segments that engage in different business activities for the Group. The Groups Board and management review the results of operating segments.

Business review

BUSINESS COMBINATIONS AND GOODWILL


In the event of a business combination, fair values are attributed to the net assets acquired. Goodwill, which represents the difference between the purchase consideration and the fair value of the net assets acquired, is capitalised and subject to an impairment review at least annually, or more frequently if events or changes in circumstances indicate that the goodwill may be impaired. Goodwill is treated as an asset of the relevant entity to which it relates, including non-US Dollar entities. Accordingly, it is retranslated into US Dollars at the closing rate of exchange at each balance sheet date.

PROPERTY, PLANT AND EQUIPMENT EXCLUDING DECOMMISSIONING ASSETS


All property, plant and equipment is carried at depreciated historical cost. Additions represent new, or replacements of specific components of, property, plant and equipment. Contributions received towards the cost of property, plant and equipment (including government grants) are included in creditors as deferred income and credited to the income statement over the life of the assets. Finance costs associated with borrowings used to finance major capital projects are capitalised up to the point at which the asset is ready for its intended use.

Corporate governance

BASIS OF CONSOLIDATION
The Financial Statements comprise a consolidation of the accounts of the Company and its subsidiary undertakings and incorporate the results of its share of jointly controlled entities and associates using the equity method of accounting. All inter-company transactions are eliminated on consolidation. Consistent accounting policies have been used to prepare the consolidated Financial Statements. Most of BG Groups exploration and production activity is conducted through jointly controlled operations. The Group accounts for its own share of the assets, liabilities and cash flows associated with these jointly controlled operations using the proportional consolidation method. The results of undertakings acquired or disposed of are consolidated from or to the date when control passes to or from the Company. For the Company Financial Statements only, investments in subsidiary undertakings are stated at cost less any provision for impairment.

SERVICE CONCESSION ARRANGEMENTS


Infrastructure associated with public-to-private service concession arrangements considered to be under the control of a regulator is recognised as an intangible concession asset when there is no contractual right to receive cash from the regulator. Intangible concession assets are amortised over the concession period. Additions to the infrastructure are accounted for as a construction contract with the regulator, with revenues and associated costs recognised in the income statement using the percentage of completion method based on costs incurred to date. Further information on the adoption of IFRIC 12 Service Concession Arrangements can be found in note 1, page 89.

Financial statements

DEPRECIATION AND AMORTISATION


Freehold land is not depreciated. Other property, plant and equipment, except exploration and production assets, is depreciated on a straightline basis at rates sufficient to write off the historical cost less residual value of individual assets over their estimated useful economic lives. Asset lives and residual values are reassessed annually. The depreciation periods for the principal categories of assets are as follows:
Freehold and leasehold buildings Mains, services and meters Plant and machinery Motor vehicles and office equipment up to 50 years up to 60 years 5 to 30 years up to 10 years

PRESENTATION OF RESULTS
BG Group presents its results in the income statement to separately identify the contribution of disposals, certain re-measurements and impairments in order to provide readers with a clear and consistent presentation of the underlying operating performance of the Groups ongoing business, see note 2, page 91 and note 10, page 106. During 2010, BG Group sold, or agreed to sell, the majority of the Power Generation business segment. Accordingly, these operations have been treated as discontinued. A single amount is presented on the income statement for discontinued operations, comprising the post-tax results of these businesses and the post-tax profit or loss recognised on re-measurement to fair value less costs to sell and on disposal of the businesses. Comparative information has also been restated to reflect the presentation of discontinued operations as a separate line item. See note 2, page 91 and note 8, page 104.

Shareholder information

Exploration and production assets are depreciated from the commencement of commercial production in the fields concerned, using the unit of production method based on the proved developed reserves of those fields, except that a basis of total proved reserves is used for acquired interests and for facilities.

BG Group A year of delivery

www.bg-group.com

80
Principal accounting policies continued

Financial statements Annual Report and Accounts 2010

Exploration and production assets associated with unconventional activities, including coal seam and shale gas, are depreciated from commencement of commercial production in the fields concerned, using the unit of production method based on proved plus probable reserves, together with the estimated future development expenditure required to develop those reserves. Intangible assets in respect of contractual rights and service concession arrangements are recognised at cost less amortisation. They are amortised on a straight-line basis over the term of the related contracts or concession. Changes in depreciation and amortisation estimates are dealt withprospectively.

EXPLORATION EXPENDITURE
BG Group uses the successful efforts method of accounting for exploration expenditure. Exploration expenditure, including licence acquisition costs, is capitalised as an intangible asset when incurred and certain expenditure, such as geological and geophysical exploration costs, is expensed. A review of each licence or field is carried out, at least annually, to ascertain whether commercial reserves have been discovered. When proved reserves are determined, the relevant expenditure, including licence acquisition costs, is transferred to property, plant and equipment. Relevant exploration expenditure associated with unconventional activities, including coal seam and shale gas, is transferred to property, plant and equipment on the determination of proved plus probable reserves. Exploration expenditure transferred to property, plant and equipment is subsequently depreciated on a unit of production basis. Expenditure deemed to be unsuccessful is written-off to the income statement. Exploration expenditure is assessed for impairment when facts and circumstances suggest that its carrying amount exceeds its recoverable amount. For the purposes of impairment testing, exploration and production assets may be aggregated into appropriate cash generating units based on considerations including geographical location, the use of common facilities and marketing arrangements.

IMPAIRMENT OF NON-CURRENT ASSETS


Non-current assets subject to depreciation or amortisation are reviewed for impairments whenever events or other changes in circumstances indicate that the carrying amount may not be recoverable. Any impairment of non-current assets (excluding financial assets) is calculated as the difference between the carrying values of cash generating units (including associated goodwill) and their recoverable amount, being the higher of the estimated value in use or fair value less costs to sell at the date the impairment loss is recognised. Value in use represents the net present value of expected future cash flows discounted on a pre-tax basis.

ASSETS HELD FOR SALE


When an asset or disposal groups carrying value will be recovered principally through a sale transaction rather than through continuing use, it is classified as held for sale and stated at the lower of carrying value and fair value less costs to sell. No depreciation is charged in respect of non-current assets classified as held for sale.

DECOMMISSIONING COSTS
Where a legal or constructive obligation has been incurred, provision is made for the net present value of the estimated cost of decommissioning at the end of the producing lives of assets. When this provision gives access to future economic benefits, an asset is recognised and then subsequently depreciated in line with the life of the underlying producing asset, otherwise the costs are charged to the income statement. The unwinding of the discount on the provision is included in the income statement within finance costs. Any changes to estimated costs or discount rates are dealt with prospectively.

INVENTORIES
Inventories, including inventories of gas, liquefied natural gas (LNG) and oil held for sale in the ordinary course of business, are stated at weighted average historical cost less provision for deterioration and obsolescence or, if lower, net realisable value.

REVENUE RECOGNITION
Revenue associated with exploration and production sales (of natural gas, crude oil and petroleum products) is recorded when title passes to the customer. Revenue from the production of natural gas and oil in which BG Group has an interest with other producers is recognised based on the Groups working interest and the terms of the relevant production sharing contracts (entitlement method). Differences between production sold and the Groups share of production are notsignificant. Sales of LNG and associated products are recognised when title passes to the customer. LNG shipping revenue is recognised over the period of the relevant contract. Revenue from gas transmission and distribution activities is recognised in the same period in which the related volumes are delivered to the customer or when construction services under a service concession arrangement are provided to the regulator. All other revenue is recognised when title passes to the customer.

FOREIGN CURRENCIES
Following a period of sustained international growth, the Groups cash flows and economic returns are now principally denominated in US Dollars. Accordingly, from 1 January 2010, BG Group changed the currency in which it presents its consolidated and parent Company Financial Statements from Pound Sterling (the functional currency of the Company) to US Dollars. For further information see note 1, page 89. On consolidation, assets and liabilities denominated in currencies other than US Dollars are translated into US Dollars at closing rates of exchange. Non-US Dollar trading results of the parent company, subsidiary undertakings, jointly controlled entities and associates are translated into US Dollars at average rates of exchange. Differences resulting from the retranslation of the opening net assets and the results for the year are recognised in other comprehensive income. Any differences arising from 1 January 2003, the date of transition to IFRS, are presented as a separate component of equity. Share capital, share premium and other reserves are translated into US Dollars at the historic rates prevailing at the date of the transaction.

www.bg-group.com

BG Group A year of delivery

81

Exchange differences on monetary assets and liabilities arising in individual entities are taken to the income statement, with the exception of exchange differences on monetary items that form part of a net investment in a foreign operation. These differences are taken to reserves until the related net investment is disposed of. All other exchange movements are dealt with through the income statement.

Movements in the fair value of derivative financial instruments not included in hedging relationships are recognised in the income statement. Loans held by the Group are initially measured at fair value and subsequently carried at amortised cost, except where they form the underlying transaction in an effective fair value hedge relationship when the carrying value is adjusted to reflect fair value movements associated with the hedged risks. Such adjustments are reported in the income statement. Other financial instruments such as receivable balances are measured at amortised cost less impairments. Liabilities associated with financial guarantee contracts are initially measured at fair value and re-measured at each balance sheet date.

Business review

CASH AND CASH EQUIVALENTS


Cash and cash equivalents comprise cash in hand, deposits with a maturity of three months or less, and other short-term highly liquid investments that are readily convertible to known amounts of cash.

DEFERRED TAX
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Currently enacted or substantively enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available, against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, jointly controlled entities and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

COMMODITY INSTRUMENTS
Within the ordinary course of business BG Group routinely enters into sale and purchase transactions for commodities. The majority of these transactions take the form of contracts that were entered into and continue to be held for the purpose of receipt or delivery of the commodity in accordance with the Groups expected sale, purchase or usage requirements. Such contracts are not within the scope of IAS 39. Certain long-term gas sales contracts operating in the UK gas market have terms within the contract that constitute written options, and accordingly they fall within the scope of IAS 39. In addition, commodity instruments are used to manage certain price exposures in respect of optimising the timing and location of physical gas and LNG commitments. These contracts are recognised on the balance sheet at fair value with movements in fair value recognised in the income statement, see Presentation of results on page 79; note 2, page 91; and note 10, page 106. The Group uses various commodity based derivative instruments to manage some of the risks arising from fluctuations in commodity prices. Such contracts include physical and net-settled forwards, futures, swaps and options. Where these derivatives have been designated as cash flow hedges of underlying commodity price exposures, certain gains and losses attributable to these instruments are deferred in other comprehensive income and recognised in the income statement when the underlying hedged transaction crystallises or is no longer expected to occur. All other commodity contracts within the scope of IAS 39 are measured at fair value with gains and losses taken to the income statement. Gas contracts and related derivative instruments associated with the physical purchase and re-sale of third-party gas are presented on a net basis within other operating income. Corporate governance

LEASES
Assets held under finance leases are capitalised and included in property, plant and equipment at the lower of fair value and the present value of the minimum lease payments as determined at the inception of the lease. The obligations relating to finance leases, net of finance charges in respect of future periods, are determined at the inception of the lease and included within borrowings. The interest element of the rental obligation is allocated to accounting periods during the lease term to reflect the constant rate of interest on the remaining balance of the obligation for each accounting period. BG Group has certain long-term arrangements under which it has acquired all of the capacity of certain property, plant and equipment. In circumstances where it is considered that the Group has the majority of the risks and rewards of ownership of the plant, the arrangement is considered to contain a finance lease. Rentals under operating leases are charged to the income statement on a straight-line basis over the lease term.

Financial statements

FINANCIAL INSTRUMENTS
Derivative financial instruments are initially recognised and subsequently re-measured at fair value. Derivative financial instruments utilised by BG Groups treasury operations include interest rate swaps, foreign currency swaps, cross-currency interest rate swaps, forward rate agreements and forward exchange contracts. Certain derivative financial instruments are designated as hedges in line with the Groups risk management policies. Gains and losses arising from the re-measurement of these financial instruments are either recognised in the income statement or deferred in other comprehensive income depending on the type of hedging relationship. When a hedging instrument is sold or expires, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the hedged transaction is recognised in the income statement or is no longer expected to occur.

PENSIONS
The amount recognised on the balance sheet in respect of liabilities for defined benefit pension and post-retirement benefit plans represents the present value of the obligations offset by the fair value of plan assets and excluding actuarial gains and losses not recognised. The cost of providing retirement pensions and related benefits is charged to the income statement over the periods benefiting from the employees services. Current service costs are reflected in operating profit and financing costs are reflected in finance costs in the period in which they arise. Actuarial gains and losses that exceed the greater of 10% of plan assets or plan obligations are spread over the average remaining service lives of the employees participating in the plan and are reflected in operating profit. Shareholder information

BG Group A year of delivery

www.bg-group.com

82
Principal accounting policies continued

Financial statements Annual Report and Accounts 2010

Contributions made to defined contribution pension plans are charged to the income statement when payable.

SHARE-BASED PAYMENTS
The cost of providing share-based payments to employees is charged to the income statement over the vesting period of the related share options or share allocations. The cost is based on the fair value of the options or shares allocated and the number of awards expected to vest. The fair value of each option or share is determined using either a Black-Scholes option pricing model or a Monte Carlo projection model, depending on the type of award. Market related performance conditions are reflected in the fair value of the share. Non-market related performance conditions are allowed for using a separate assumption about the number of awards expected to vest; the final charge made reflects the number actually vesting.

RESEARCH AND DEVELOPMENT EXPENDITURE


All research expenditure is charged to the income statement as incurred. Development expenditure is charged to the income statement as incurred unless it meets the recognition criteria set out in IAS 38 Intangible Assets. Where the recognition criteria are met, intangible assets are capitalised and amortised over their useful economic lives.

www.bg-group.com

BG Group A year of delivery

83

Consolidated income statement


The Group for the year ended 31December 2010 Disposals, Business re-measurements Performance and impairments $m $m Total $m 2009 Restated(a) Disposals, Business re-measurements Performance and impairments $m $m Total $m

Business review

Notes

Group revenue Other operating income Group revenue and other operating income Operating costs Profits and losses on disposal of non-current assets and impairments Operating profit/(loss)(b) Finance income Finance costs Share of post-tax results from joint ventures and associates Profit/(loss) before tax Taxation Profit/(loss) for the year from continuing operations Profit/(loss) for the year from discontinued operations Profit/(loss) for the year Profit attributable to: Shareholders (earnings) Non-controlling interest

2 2, 5 2 3 5 2 5, 6 5, 6 2 5, 7 2, 5 8

17 166 197 17 363 (10 874) 6 489 155 (262) 275 6 657 (2 494) 4 163 4 163 4 013 150 4 163

(591) (591) (336) (927) 22 (22) (927) 296 (631) (32) (663) (662) (1) (663)

17 166 (394) 16 772 (10 874) (336) 5 562 177 (284) 275 5 730 (2 198) 3 532 (32) 3 500 3 351 149 3 500

15 441 226 15 667 (9 723) 5 944 99 (246) 246 6 043 (2 500) 3 543 3 543 3 392 151 3 543

161 161 (216) (55) 2 (35) (88) 7 (81) 8 (73) (73) (73)

15 441 387 15 828 (9 723) (216) 5 889 101 (281) 246 5 955 (2 493) 3 462 8 3 470 3 319 151 3 470

Corporate governance

2 2, 5

Earnings per ordinary share continuing operations (cents) Basic Diluted Earnings per ordinary share discontinued operations (cents) Basic Diluted Total earnings per ordinary share (cents) Basic Diluted Total operating profit/(loss) including share of pre-tax operating results from joint ventures and associates(c)

10 10

118.7 118.0 118.7 118.0

(18.6) (18.5) (1.0) (1.0) (19.6) (19.5)

100.1 99.5 (1.0) (1.0) 99.1 98.5

100.9 100.1 100.9 100.1

(2.4) (2.4) 0.2 0.2 (2.2) (2.2)

98.5 97.7 0.2 0.2 98.7 97.9

Financial statements

6 925

(927)

5 998

6 330

(55)

6 275

(a) See note 1, page 89 and note 8, page 104. (b) Operating profit/(loss) is before share of results from joint ventures and associates. (c) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business.

For information on dividends paid and proposed in the year see note 9, page 105.

Shareholder information

The accounting policies on pages 79 to 82 together with the notes on pages 89 to 131 form part of these accounts.

BG Group A year of delivery

www.bg-group.com

84

Financial statements Annual Report and Accounts 2010

Consolidated statement of comprehensive income


for the year ended 31December 2010 $m 2009 Restated(a) $m

Profit for the year Net fair value losses on cash flow hedges Transfers to income statement on cash flow hedges(b) Transfers to non-current assets on cash flow hedges Net fair value gains on net investment hedges Tax on cash flow and net investment hedges(c) Fair value movements on available-for-sale assets, net of tax(d) Currency translation adjustments(e) Other comprehensive income for the year, net of tax(f) Total comprehensive income for the year Attributable to: Shareholders Non-controlling interest

3 500 (528) (288) 20 206 4 1 180 594 4 094 3 928 166 4 094

3 470 (227) (773) 1 24 252 4 2 455 1 736 5 206 5 006 200 5 206

(a) See note 1, page 89. (b) During 2010, a pre-tax gain of $246m (2009 $702m) was transferred from the hedging reserve to revenue to match against the underlying transactions and a pre-tax gain of $42m (2009 $71m) was transferred from the hedging reserve to other operating income in respect of discontinued cash flow hedges. (c) Includes tax relating to cash flow hedges of $209m (2009 $260m) and tax relating to net investment hedges of $(3)m (2009 $(8)m). (d) Includes tax of $(2)m (2009 $2m). (e) In 2010, $(32)m (2009 $nil) was transferred to the income statement as part of the profit/(loss) on disposal of non-US Dollar denominated operations. (f) Includes other comprehensive income/(expense) in respect of joint ventures and associates of $(77)m (2009 $85m).

The profit for the financial year for the Company was $7m (2009 $3 339m). Total comprehensive income/(expense) for the Company was $(254)m (2009 $3 840m). As permitted by section 408 of the Companies Act 2006, no income statement or statement of comprehensive income is presented for the Company.

The accounting policies on pages 79 to 82 together with the notes on pages 89 to 131 form part of these accounts.

www.bg-group.com

BG Group A year of delivery

85

Balance sheets
The Group as at Note 31Dec 2010 $m 31Dec 2009 Restated(a) $m 1 Jan 2009 Restated(a) $m 31Dec 2010 $m The Company 31Dec 2009 Restated(a) $m 1 Jan 2009 Restated(a) $m

Business review

Assets Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in subsidiary undertakings Investments Deferred tax assets Trade and other receivables Commodity contracts and other derivative financial instruments Current assets Inventories Trade and other receivables Current tax receivable Commodity contracts and other derivative financial instruments Cash and cash equivalents

11 12 13 14 14 23 16 20

820 7 193 28 263 2 824 518 206 283 40 107 655 5 994 233 550 2 533 9 965 227 50 299

781 9 290 20 131 2 953 137 125 608 34 025 769 4 721 173 1 635 1 119 8 417 42 442

600 6 422 15 146 2 345 110 136 1 345 26 104 808 5 199 131 2 211 1 485 9 834 35 938

3 832 12 3 844 3 883 2 1 3 886 7 730

3 900 10 3 910 4 612 5 1 4 618 8 528

3 423 7 3 430 1 731 2 1 733 5 163

15 16 20 17

Corporate governance

Assets classified as held for sale Total assets Liabilities Current liabilities Borrowings Trade and other payables Current tax liabilities Commodity contracts and other derivative financial instruments Non-current liabilities Borrowings Trade and other payables Commodity contracts and other derivative financial instruments Deferred tax liabilities Retirement benefit obligations Provisions for other liabilities and charges

18

19 21 20

(1 258) (4 388) (1 814) (1 426) (8 886) (8 446) (72) (901) (3 134) (260) (1 812) (14 625) (104) (23 615) 26 684

(1 158) (4 186) (1 579) (1 390) (8 313) (5 024) (63) (849) (3 147) (279) (1 537) (10 899) (19 212) 23 230

(404) (5 222) (1 614) (2 088) (9 328) (2 727) (55) (760) (2 955) (256) (1 333) (8 086) (17 414) 18 524

(80) (80) (80) 7 650

(100) (100) (100) 8 428

(98) (14) (112)

Financial statements

19 21 20 23 27 22

(112) 5 051

Liabilities associated with assets classified as held for sale Total liabilities Net assets
(a) See note 1, page 89.

18

Shareholder information

The accounting policies on pages 79 to 82 together with the notes on pages 89 to 131 form part of these accounts.

BG Group A year of delivery

www.bg-group.com

86
Balance sheets continued

Financial statements Annual Report and Accounts 2010

The Group as at Note 31Dec 2010 $m 31Dec 2009 Restated(a) $m 1 Jan 2009 Restated(a) $m 31Dec 2010 $m

The Company 31Dec 2009 Restated(a) $m 1 Jan 2009 Restated(a) $m

Equity Ordinary shares Share premium Hedging reserve Translation reserve Other reserves Retained earnings Total shareholders equity Non-controlling interest in equity Total equity
(a) See note 1, page 89.

24

576 537 (457) 2 877 2 710 20 085 26 328 356 26 684

574 444 150 1 697 2 710 17 334 22 909 321 23 230

571 348 889 (725) 2 710 14 550 18 343 181 18 524

576 537 (316) 1 203 5 650 7 650 7 650

574 444 (55) 1 203 6 262 8 428 8 428

571 348 (556) 1 203 3 485 5 051 5 051

The accounts on pages 79 to 131 were approved by the Board and signed on its behalf on 11 March 2011 by: Ashley Almanza Chief Financial Officer

The accounting policies on pages 79 to 82 together with the notes on pages 89 to 131 form part of these accounts.

www.bg-group.com

BG Group A year of delivery

87

Statements of changes in equity


The Group Called up share capital $m
(d)

Share premium account $m

Hedging reserve $m

Translation reserve(a) $m

Other reserves(b) $m

Retained earnings(c) $m

Total $m

Noncontrolling interest $m

Business review

Total $m

As at 1 January 2009 restated Total comprehensive income for the year Profit for the year Hedges, net of tax Fair value movements on availablefor-sale assets, net of tax Currency translation adjustments Adjustment for share schemes Tax in respect of share schemes(e) Dividends Issue of shares(f) Purchase of own shares As at 31December 2009 restated(d) Total comprehensive income for the year Profit for the year Hedges, net of tax Fair value movements on availablefor-sale assets, net of tax Currency translation adjustments Adjustment for share schemes Tax in respect of share schemes(e) Dividends Issue of shares(f) Purchase of own shares As at 31December 2010

571 3 574 2 576

348 96 444 93 537

889 (739) (739) 150 (607) (607) (457)

(725) 2 422 16 2 406 1 697 1 180 17 1 163 2 877

2 710 2 710 2 710

14 550 3 323 3 319 4 65 33 (633) (4) 17 334 3 355 3 351 4 64 18 (684) (2) 20 085

18 343 5 006 3 319 (723) 4 2 406 65 33 (633) 99 (4) 22 909 3 928 3 351 (590) 4 1 163 64 18 (684) 95 (2) 26 328

181 200 151 49 (60) 321 166 149 17 (131) 356

18 524 5 206 3 470 (723) 4 2 455 65 33 (693) 99 (4) 23 230 4 094 3 500 (590) 4 1 180 64 18 (815) 95 (2) 26 684

Corporate governance

The Company

Called up share capital $m

Share premium account $m

Translation reserve $m

Other reserves(b) $m

Retained earnings $m

Total $m

As at 1 January 2009 restated(d) Total comprehensive income for the year(g) Adjustment for share schemes Tax in respect of share schemes(e) Dividends Issue of shares(f) Purchase of own shares As at 31December 2009 restated(d) Total comprehensive income for the year(g) Adjustment for share schemes Tax in respect of share schemes(e) Dividends Issue of shares(f) Purchase of own shares As at 31December 2010

571 3 574 2 576

348 96 444 93 537

(556) 501 (55) (261) (316)

1 203 1 203 1 203

3 485 3 339 65 10 (633) (4) 6 262 7 64 3 (684) (2) 5 650

5 051 3 840 65 10 (633) 99 (4) 8 428 (254) 64 3 (684) 95 (2) 7 650

Financial statements

(a) Includes currency translation gains of $21m (2009 $36m) relating to joint ventures and associates. (b) Other reserves, which are not distributable, represent the difference between the carrying value of subsidiary undertaking investments and their respective capital structures following the restructuring and refinancing in 1999. (c) Includes retained earnings in respect of joint ventures and associates of $466m (2009 $413m). (d) See note 1, page 89. (e) This consists of current tax of $22m (2009 $33m) and deferred tax of $(4)m (2009 $nil) in the Group and current tax of $1m (2009 $11m) and deferred tax of $2m (2009 $(1)m) in the Company. (f) The issue of shares relates to amounts issued to employees under employee share option schemes for a cash consideration of $95m (2009 $99m). (g) Comprises profit for the year of $7m (2009 $3 339m) and currency translation adjustments of $(261)m (2009 $501m).

Shareholder information

The accounting policies on pages 79 to 82 together with the notes on pages 89 to 131 form part of these accounts.

BG Group A year of delivery

www.bg-group.com

88

Financial statements Annual Report and Accounts 2010

Cash flow statements


The Group for the year ended 31December Note 2010 $m 2009 Restated(a) $m The Company 2010 $m 2009 Restated(a) $m

Cash generated by operations Income taxes (paid)/received Net cash inflow/(outflow) from operating activities Cash flows from investing activities Dividends received Proceeds from disposal of subsidiary undertakings and investments(b) Proceeds from disposal of property, plant and equipment and intangible assets Purchase of property, plant and equipment and intangible assets Loans to and repayments from joint ventures and associates Investments in subsidiaries, joint ventures and associates Net cash (outflow)/inflow from investing activities Cash flows from financing activities Interest paid(c) Interest received Dividends paid Dividends paid to non-controlling interest Net proceeds from issue of new borrowings(d) Repayment of borrowings Issue of shares Purchase of own shares Funding movements with subsidiary Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes Cash and cash equivalents at 31December(e)

28

8 370 (1 984) 6 386 198 468 897 (8 397) 92 (529) (7 271) (254) 25 (680) (108) 3 559 (348) 95 (2) 2 287 1 402 1 119 30 2 551

7 597 (2 065) 5 532 227 5 (6 767) (101) (1 094) (7 730) (216) 50 (633) (57) 2 904 (332) 99 (4) 1 811 (387) 1 485 21 1 119

(13) 1 (12) (680) 95 (2) 599 12 1 1

(7) 2 (5) 3 294 3 294 (633) 99 (4) (2 752) (3 290) (1) 2 1

17 17

Major non-cash transactions included assets acquired during the year of $492m (2009 $99m) financed through finance lease arrangements. In 2009, BG Group completed the exchange of equity interests in certain production assets. Other non-cash transactions in 2009 included $230m relating to the acquisition of property, plant and equipment settled using certain pre-existing receivables with the same counterparty. The cash flows above are inclusive of discontinued operations (see note 8, page 104).
(a) (b) (c) (d) (e) See note 1, page 89. Includes the disposal of Seabank Power Limited for $327m and the sale of Premier Power Limited for $141m net of $23m cash held at the date of disposal (see note 8, page 104). Includes capitalised interest of $79m (2009 $49m). Includes net cash flows relating to short maturity financing items. The balance at 31December 2010 includes cash and cash equivalents of $2 533m and cash included within assets held for sale of $18m.

The accounting policies on pages 79 to 82 together with the notes on pages 89 to 131 form part of these accounts.

www.bg-group.com

BG Group A year of delivery

89

Notes to the accounts


1 CHANGE IN ACCOUNTING POLICY, NEW ACCOUNTING STANDARDS AND POST BALANCE SHEET EVENTS
Business review Change in presentation currency Following a period of sustained international growth, the Groups cash flows and economic returns are now principally denominated in US Dollars. From 1 January 2010, BG Group changed the currency in which it presents its consolidated and parent Company Financial Statements from Pounds Sterling to US Dollars. A change in presentation currency is a change in accounting policy which is accounted for retrospectively. Statutory financial information included in the Groups Annual Report and Accounts for the year ended 31December 2010 previously reported in Pounds Sterling has been restated into US Dollars using the procedures outlined below:

assets and liabilities denominated in non-US Dollar currencies were translated into US Dollars at closing rates of exchange. Non-US Dollar trading results were translated into US Dollars at average rates of exchange. Differences resulting from the retranslation of the opening net assets and the results for the year have been taken to reserves; the cumulative translation reserve was set to nil at 1 January 2003 (i.e. the transition date to IFRS). All subsequent movements comprising differences on the retranslation of the opening net assets of non-US Dollar subsidiaries have been charged to the translation reserve. Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions; and all exchange rates used were extracted from the Groups underlying financial records. Corporate governance

The exchange rates of US Dollar to Pound Sterling over the periods included in this Annual Report and Accounts are as follows:
US Dollar/Pound Sterling exchange rate 2010 2009 2008 2007 2006

Closing rate Average rate

1.5657 1.5489

1.6149 1.5510

1.4378 1.8934

1.9906 2.0029

1.9572 1.8282

The impact of new accounting standards, amendments and interpretations on BG Groups Financial Statements for 2010 is set out below. These did not result in any changes to the Financial Statements of the parent Company.

IFRIC 12 Service Concession Arrangements


The International Financial Reporting Interpretations Committee (IFRIC) issued IFRIC 12 Service Concession Arrangements in November 2006. Theinterpretation provides guidance on the accounting by operators for public-to-private service concession arrangements and was applicable for the year ended 31December 2010. IFRIC 12 requires infrastructure considered to be under the control of a regulator rather than an operator to be recognised as an intangible concession asset and amortised over the concession period. Prior to the adoption of IFRIC 12 such infrastructure was recognised as property, plant and equipment of the operator and depreciated over its useful economic life. The interpretation also requires additions to the infrastructure incurred by the operator to be accounted for as a construction contract with the regulator, with revenues and associated costs recognised in the income statement on a percentage of completion basis. The Group has concluded that the Comgs concession in Brazil falls within the scope of the interpretation. Accordingly, on 1 January 2010 infrastructure which forms part of the transmission and distribution network operated by Comgs of approximately $1.6 billion (1 January 2009 $1.1billion) was recognised as intangible assets resulting in a corresponding decrease to property, plant and equipment. Comparative information has been restated to reflect this arrangement. The application of this interpretation increased both revenue and operating costs by $148m in 2010 (2009 $114m). There was no impact on net earnings, basic earnings per share or diluted earnings per share.

Financial statements

IFRS 3 (revised) Business Combinations


The International Accounting Standards Board (IASB) issued IFRS 3 (revised) in January 2008. The revised standard introduced changes to the accounting for contingent consideration and transaction costs, as well as allowing an option to calculate goodwill based on the parents share of net assets only or including goodwill relating to non-controlling interests. The standard was applicable for the year ended 31December 2010 but did not result in any changes to the Groups Financial Statements.

IAS 27 (revised) Consolidated and Separate Financial Statements


The IASB issued IAS 27 (revised) in January 2008. The revisions require the effects of transactions with non-controlling interests to be recorded in equity when there is no change in control, and specify the accounting on loss of control. The standard was applicable for the year ended 31December 2010 but did not result in any changes to the Groups Financial Statements. Shareholder information

Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items
The IASB issued an amendment to IAS 39 in July 2008. The amendment clarifies how the existing principles underlying hedge accounting should be applied in the designation of a one-sided risk in a hedged item and inflation in a financial hedged item. The amendment was applicable for the year ended 31December 2010 but did not result in any changes to the Groups Financial Statements.

BG Group A year of delivery

www.bg-group.com

90
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

CHANGE IN ACCOUNTING POLICY, NEW ACCOUNTING STANDARDS AND POST BALANCE SHEET EVENTS continued

Amendment to IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions


The IASB issued an amendment to IFRS 2 in June 2009. The amendment clarifies the scope and accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving goods or services when that entity has no obligation to settle the share-based payment transaction. The amendment was applicable for the year ended 31December 2010 but did not result in any changes to the Groups Financial Statements.

IFRIC 17 Distribution of Non-cash Assets to Owners


The IFRIC issued IFRIC 17 in November 2008. The interpretation clarifies how an entity should account for the distribution of non-cash assets when paying dividends to its owners. This interpretation was applicable for the year ended 31December 2010 but did not result in any changes to the Groups Financial Statements.

Improvements to IFRSs
The IASB issued amendments to a number of IFRSs in April 2009 as part of its annual improvement project. These amendments were applicable for the year ended 31December 2010 but did not result in any changes to the Groups Financial Statements. The following standards, amendments and interpretations have been issued by the IASB and IFRIC up to the date of this report, but have not been adopted by the Group in these Financial Statements and in some cases have not yet been endorsed by the European Union.

IFRS 9 Financial Instruments


The IASB issued IFRS 9 in November 2009 and subsequently added to the scope of the standard in October 2010. The standard introduces new requirements for the classification and measurement of financial assets and liabilities and is applicable for accounting periods beginning on or after 1 January 2013. BG Group is currently reviewing the standard to determine the likely impact on the Groups Financial Statements.

IAS 24 (revised) Related Party Disclosures


The IASB issued IAS 24 (revised) in November 2009. The revisions provide a partial exemption from the disclosure requirements for governmentrelated entities and simplify the definition of a related party. The revisions are applicable for accounting periods beginning on or after 1 January 2011 and are not expected to have a material impact on the Groups Financial Statements.

Amendment to IFRS 7 Financial Instruments: Disclosures


The IASB issued an amendment to IFRS 7 in October 2010. The amendment primarily introduces new disclosure requirements associated with the transfer and securitisation of financial assets. The revisions are applicable for accounting periods beginning on or after 1 July 2011 and are not expected to have a material impact on the Groups Financial Statements.

Improvements to IFRSs
The IASB issued amendments to a number of IFRSs in May 2010 as part of its annual improvement project. These amendments will be adopted by the Group for the year ending 31December 2011 and are not expected to have a material impact on the Groups Financial Statements.

Other amendments and interpretations


Up to the end of 2010, IFRIC issued IFRIC 19 Extinguishing Financial Liabilities with Equity, applicable for accounting periods beginning on or after 1 July 2010 and amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement, applicable for accounting periods beginning on or after 1 January 2011. The IASB issued amendments to IAS 32 Classification of Rights Issues, applicable for accounting periods beginning on or after 1 February 2010. These amendments and interpretations are not expected to have a material impact on the Groups Financial Statements.

POST BALANCE SHEET EVENTS


BG Group has important businesses in Tunisia and Egypt. Recent events in these countries have had no material impact on BG Group and management continues to monitor developments closely.

www.bg-group.com

BG Group A year of delivery

91

SEGMENTAL ANALYSIS AND RESULTS PRESENTATION

Business review

BG Groups reportable segments are those used by the Groups Board and management (the Chief Operating Decision Maker as defined in IFRS 8 Operating Segments) to run the business and are based on differences in the Groups products and services. Segment information is presented on the same basis as that used for internal reporting purposes. BG Groups three principal operating and reporting segments in 2010 comprise Exploration and Production (E&P), Liquefied Natural Gas (LNG), and Transmission and Distribution (T&D). E&P comprises exploration, development, production and marketing of hydrocarbons with a focus on natural gas. LNG combines the development and use of LNG import and export facilities with the purchase, shipping and sale of LNG and regasified natural gas. T&D develops, owns and operates major pipelines, distribution networks and power stations, and supplies natural gas and electricity through these to the end customer. Other activities primarily comprise costs relating to business development expenditure and certain corporate activities. Following the disposal of the majority of the Groups Power Generation (Power) businesses, the Power segment has been treated as discontinued operations. The Power businesses that remain with BG Group have been allocated to other business segments based on their activity and location. Comparative information has been restated to reflect the presentation of discontinued operations as a separate line item. See note 8, page 104, for further details. In 2010, the operations were structured in four main geographical areas: Europe and Central Asia region; Africa, Middle East and Asia region; Americas and Global LNG region; and Australia region. Intra-group and inter-segment sales are settled at market prices and are generally based on the same prices as those charged to third parties (arms length principle). Group revenue, profit for the year, non-current assets, net assets, gross assets and gross liabilities, depreciation and amortisation and capital investment attributable to BG Group activities are shown on pages 91 to 94, analysed by operating segment. Additional information on capital investment is also provided on a regional basis. The presentation of BG Groups results under International Financial Reporting Standards (IFRS) separately identifies the effect of the remeasurement of certain financial instruments and profits and losses on the disposal and impairment of non-current assets and businesses. Results excluding discontinued operations and disposals, certain re-measurements and impairments (Business Performance) are used by management and are presented in order to provide readers with a clear and consistent presentation of the underlying operating performance of the Groups ongoing business. Further information on Business Performance is given on page 144. The disposals, re-measurements and impairments column includes unrealised gains and losses in respect of certain long-term UK gas sales contracts classified as derivatives under IAS 39, commodity instruments that represent economic hedges but do not qualify for hedge accounting, and financial instruments used to manage foreign exchange and interest rate exposure. The separate presentation of these items best reflects the underlying performance of the business since it distinguishes between the temporary timing differences associated with re-measurements under IAS 39 rules and actual realised gains and losses. Under IFRS the results from jointly controlled entities (joint ventures) and associates are presented net of tax and finance costs on the face of the income statement. BG Group also presents the operating profit of the Group including results of joint ventures and associates before interest and tax, as this approach provides additional information on the source of the Groups operating profits. The following tables provide a reconciliation between the overall results and Business Performance and operating profit, including and excluding the results of joint ventures and associates. The geographical information provided for external revenue is based on destination.

Corporate governance Financial statements

GROUP REVENUE Analysed by operating segment


External Revenue for the year ended 31December 2010 $m 2009 $m Intra-group Revenue 2010 $m 2009 $m Total Group Revenue 2010 $m 2009 $m

Group revenue Exploration and Production Liquefied Natural Gas Transmission and Distribution Segmental revenue Less: intra-group revenue Group revenue
(a)(b)

7 781 6 304 3 081 17 166 17 166

6 999 5 761 2 681 15 441 15 441

777 45 822 (822)

414 80 494 (494)

8 558 6 349 3 081 17 988 (822) 17 166

7 413 5 841 2 681 15 935 (494) 15 441

Shareholder information

(a) External revenue attributable to the UK is $3 773m (2009 $3 471m). External revenue attributable to non-UK countries is $13 393m (2009 $11 970m) and includes $2 791m from external customers attributable to Brazil representing 16% of Group revenue (2009 $2 114m, 14%). (b) No single customer accounted for more than 10% of external revenue in 2010. External revenue in respect of a single external customer amounted to $1 709m in 2009, recognised in the E&P and LNG segments.

BG Group A year of delivery

www.bg-group.com

92
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

2 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION continued PROFIT FOR THE YEAR Analysed by operating segment
Business Performance for the year ended 31December 2010 $m 2009 $m Disposals, re-measurements and impairments 2010 $m 2009 $m Total 2010 $m 2009 $m

Group revenue Other operating income(a)(b) Group revenue and other operating income Operating profit/(loss) before share of results from joint ventures and associates(c) Exploration and Production Liquefied Natural Gas Transmission and Distribution Other activities Pre-tax share of operating results of joint ventures and associates Exploration and Production Liquefied Natural Gas Transmission and Distribution Total operating profit/(loss) Exploration and Production Liquefied Natural Gas Transmission and Distribution Other activities Net finance (costs)/income Finance income Finance costs Share of joint ventures and associates Taxation Taxation Share of joint ventures and associates Profit for the year from continuing operations Profit for the year from discontinued operations

17 166 197 17 363

15 441 226 15 667

(591) (591)

161 161

17 166 (394) 16 772

15 441 387 15 828

3 753 2 101 636 (1) 6 489 13 348 75 436 3 766 2 449 711 (1) 6 925 155 (262) (49) (156) (2 494) (112) (2 606) 4 163 4 163

3 224 2 079 660 (19) 5 944 (1) 326 61 386 3 223 2 405 721 (19) 6 330 99 (246) (45) (192) (2 500) (95) (2 595) 3 543 3 543

(374) (551) (3) 1 (927) (374) (551) (3) 1 (927) 22 (22) 296 296 (631) (32) (663)

(125) 72 (2) (55) (125) 72 (2) (55) 2 (35) (33) 7 7 (81) 8 (73)

3 379 1 550 633 5 562 13 348 75 436 3 392 1 898 708 5 998 177 (284) (49) (156) (2 198) (112) (2 310) 3 532 (32) 3 500

3 099 2 151 658 (19) 5 889 (1) 326 61 386 3 098 2 477 719 (19) 6 275 101 (281) (45) (225) (2 493) (95) (2 588) 3 462 8 3 470

Profit attributable to: Shareholders (earnings) Non-controlling interest

4 013 150 4 163

3 392 151 3 543

(662) (1) (663)

(73) (73)

3 351 149 3 500

3 319 151 3 470

(a) Other operating income includes the results of the purchase and re-sale of third-party gas in the UK, income arising from asset optimisation activities undertaken by the Groups LNG operations and unrealised gains and losses arising from the mark-to-market movements of commodity based derivative instruments, including certain UK long-term gas sales contracts classified as derivatives under IAS 39. Further details of the use and valuation of commodity based financial instruments are shown in note 20, page 113. Further information on other operating income is given in note 5, page 102. (b) Business Performance Other operating income is attributable to segments as follows: E&P $25m (2009 $35m) and LNG $172m (2009 $191m). (c) Operating profit/(loss) before share of results from joint ventures and associates includes disposals and provisions for impairment of $(336)m (2009 $(216)m), attributable to segments as follows: E&P $(334)m (2009 $(214)m), T&D $(3)m (2009 $(2)m) and Other $1m (2009 $nil). Also included are: (i) non-cash re-measurements of $(591)m (2009 $161m), attributable to segments as follows: E&P $(40)m (2009 $89m) and LNG $(551)m (2009 $72m); and (ii) $382m (2009 $545m) of unsuccessful exploration expenditure written off and charged to the E&P segment.

www.bg-group.com

BG Group A year of delivery

93

2 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION continued PROFIT FOR THE YEAR continued Analysed by operating segment
Total operating profit/(loss)
for the year ended 31December Business Performance 2010 $m 2009 $m Disposals, re-measurements and impairments 2010 $m 2009 $m Total 2010 $m 2009 $m

Business review

Exploration and Production Liquefied Natural Gas Transmission and Distribution Other activities Less: pre-tax share of operating results of joint ventures and associates Add: share of post-tax results from joint ventures and associates Net finance costs Profit before tax Taxation Profit for the year from continuing operations Profit for the year from discontinued operations

3 766 2 449 711 6 926 (1) 6 925

3 223 2 405 721 6 349 (19) 6 330

(374) (551) (3) (928) 1 (927)

(125) 72 (2) (55) (55)

3 392 1 898 708 5 998 5 998 (436) 275 (107) 5 730 (2 198) 3 532 (32) 3 500

3 098 2 477 719 6 294 (19) 6 275 (386) 246 (180) 5 955 (2 493) 3 462 8 3 470

Corporate governance

JOINT VENTURES AND ASSOCIATES Analysed by operating segment


Pre-tax share of operating results of joint ventures and associates for the year ended 31December 2010 $m 2009 $m Share of net finance costs and tax of joint ventures and associates 2010 $m 2009 $m Share of post-tax results from joint ventures and associates 2010 $m 2009 $m

Exploration and Production Liquefied Natural Gas Transmission and Distribution Continuing operations Discontinued operations

13 348 75 436 68 504

(1) 326 61 386 123 509

(5) (132) (24) (161) (30) (191)

(116) (24) (140) (55) (195)

8 216 51 275 38 313

(1) 210 37 246 68 314

Financial statements

ASSETS AND LIABILITIES Analysed by operating segment


Non-current assets(a)(b) as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m

Exploration and Production Liquefied Natural Gas Transmission and Distribution Other activities(c)

29 474 6 344 3 354 39 172 39 172

24 052 4 822 3 099 31973 1 307 33 280

17 140 3 712 2 339 23 191 1 458 24 649

(a) As at 31December 2010, excludes derivative financial instruments, deferred tax assets and finance lease receivable and includes investments in joint ventures and associates of $2 791m (2009 $2 929m), attributable to segments as follows: E&P $626m (2009 $312m), LNG $1 834m (2009 $1 917m), T&D $331m (2009 $306m) and Discontinued operations $nil (2009 $394m). (b) As at 31December 2010, amount attributable to the UK is $5 344m (2009 $5 403m). Amount attributable to non-UK countries is $33 828m (2009 $27 877m) and includes $9 548m (2009 $6 801m) attributable to Australia representing 24% (2009 20%) of the Group total, $4 832m (2009 $3 622m) attributable to Brazil representing 12% (2009 11%) of the Group total and $4 745m (2009 $2 581m) attributable to the US representing 12% (2009 8%) of the Group total. (c) Includes assets associated with discontinued operations.

Shareholder information

BG Group A year of delivery

www.bg-group.com

94
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

2 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION continued ASSETS AND LIABILITIES continued Analysed by operating segment
Total assets as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m 31Dec 2010 $m Total liabilities 31Dec 2009 $m 1 Jan 2009 $m Net assets/(liabilities) 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m

Exploration and Production Liquefied Natural Gas Transmission and Distribution Other activities(a) Net borrowings, net interest and tax

32 879 9 232 3 897 46 008 302 3 989(b) 50 299

26 823 8 258 3 558 38 639 1 526 2 277(b) 42 442

20 695 7 545 2 858 31098 1 646 3 194 35 938

(4 822) (2 503) (823) (8 148) (266) (15 201)(c) (23 615)

(3 985) (2 730) (759) (7 474) (219) (11 519)(c) (19 212)

(4 713) (2 708) (760) (8 181) (292) (8 941) (17 414)

28 057 6 729 3 074 37 860 36 (11 212) 26 684

22 838 5 528 2 799 31165 1 307 (9 242) 23 230

15 982 4 837 2 098 22 917 1 354 (5 747) 18 524

(a) Includes assets and liabilities associated with discontinued operations and assets held for sale. (b) As at 31December 2010, includes $2 533m of cash and cash equivalents (2009 $1 119m), $533m of financial derivatives (2009 $842m), $751m of deferred and current tax assets (2009 $310m) and $134m finance lease receivable (2009 $nil). (c) As at 31December 2010, includes current tax liabilities of $(1 814)m (2009 $(1 579)m), deferred tax of $(3 134)m (2009 $(3 147)m), borrowings of $(9 704)m (2009 $(6 182)m) and financial derivatives of $(469)m (2009 $(554)m).

DEPRECIATION, AMORTISATION AND IMPAIRMENT Analysed by operating segment


for the year ended 31December 2010 $m 2009 $m

Exploration and Production(a) Liquefied Natural Gas Transmission and Distribution Other activities Continuing operations Discontinued operations(b)

2 251 147 148 4 2 550 355 2 905

1 697 74 115 2 1 888 218 2 106

(a) In 2010, includes provision for impairment of $425m (2009 $217m). Further details of impairments are given in note 5, page 102. (b) In 2010, includes provision for impairment of $325m (2009 $139m). Further details of impairments are given in note 8, page 104.

CAPITAL INVESTMENT Analysed by operating segment


Capital expenditure(a) for the year ended 31December 2010 $m 2009 $m Capital investment(b) 2010 $m 2009 $m

Exploration and Production Liquefied Natural Gas Transmission and Distribution Continuing operations Discontinued operations

6 570 1 817 256 8 643 28 8 671

6 439 882 234 7 555 44 7 599

7 092 1 868 259 9 219 28 9 247

6 757 1 038 237 8 032 44 8 076

Analysed by regional segment


Capital expenditure(a) for the year ended 31December 2010 $m 2009 $m Capital investment(b) 2010 $m 2009 $m

Europe and Central Asia Africa, Middle East and Asia Americas and Global LNG Australia

1 107 1 414 4 103 2 047 8 671

1 167 2 051 2 977 1 404 7 599

1 114 1 418 4 668 2 047 9 247

1 247 2 056 3 369 1 404 8 076

(a) Comprises expenditure on property, plant and equipment and other intangible assets. (b) Comprises expenditure on property, plant and equipment, other intangible assets and investments.

www.bg-group.com

BG Group A year of delivery

95

OPERATING COSTS
2010 $m 2009 $m

Business review

Included within the Groups operating costs charged to the income statement were the following items:

Raw materials, consumables and finished goods Inventory adjustments to net realisable value(a) Employee costs (see note 4(C), page 97) Less: Own work capitalised Employee costs included within Other exploration expenditure and Research and development, below Employee costs included within Finance costs Amounts written off Other intangible assets and Property, plant and equipment Depreciation and impairments of Property, plant and equipment (see note 13, page 108) Amortisation and impairments of Other intangible assets (see note 12, page 107) Less: impairments reported within Profits and losses on disposal of non-current assets and impairments

4 106 4 1 135 (168) (77) (11) 879 2 045 456 (376) 2 125 382

3 730 18 934 (165) (60) (19) 690 1 716 172 (217) 1 671 545

Corporate governance

Unsuccessful exploration expenditure written off Other operating charges: Other exploration expenditure(b) Construction costs associated with regulated infrastructure Operating lease rentals Research and development Tariffs, royalties, liquefaction and regasification costs Net foreign exchange losses on operating activities Other costs(c) Continuing operations total
(a) Includes revaluation of LNG in storage. (b) Broadly equivalent to cash flows attributable to operating activities arising from exploration and evaluation. (c) Includes certain E&P lifting, storage, marketing and general administration costs.

383 148 311 19 1 318 28 1 171 10 874

390 114 394 17 1 075 37 1 042 9 723

Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

96
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

3 OPERATING COSTS continued ACCOUNTANTS FEES AND SERVICES


PricewaterhouseCoopers LLP has served as BG Groups independent external auditors for the two-year period ended 31December 2010, for which audited financial statements appear in this Annual Report and Accounts. The external auditors are subject to re-appointment at the Annual General Meeting, see the Notice of Meeting on pages 150 to 155. The following table presents the aggregate fees for professional services and other services rendered by PricewaterhouseCoopers LLP to BG Group:

2010 $m

2009 $m

Fees payable to the Groups auditors for the audit of both the parent Company and the Groups Annual Report and Accounts Fees payable to the Groups auditors and its associates for other services pursuant to legislation: The audit of the parents subsidiaries, pursuant to legislation Other services pursuant to legislation(a)

1.7

1.7

2.5 0.3 2.8 4.5 1.6 0.5 1.0 7.6

2.8 0.3 3.1 4.8 1.2 0.3 0.5 6.8

Total fees payable for audit services and pursuant to legislation Tax services(b) Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Company or any of its associates All other services(c)

In 2010, $33 000 of audit fees relates to audits of the Groups pension schemes (2009 $31000).
(a) Other services pursuant to legislation includes costs relating to the interim review and regulatory reporting. (b) Tax services also includes fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refunds, tax consultations (such as assistance in connection with tax audits and appeals), transfer pricing and requests for rulings or technical advice from tax authorities, tax planning services, and expatriate tax planning and services. (c) All other services includes fees billed for quarterly reviews, attestation services, consultations concerning financial accounting and reporting standards, forensic accounting, control reviews and other advice.

www.bg-group.com

BG Group A year of delivery

97

4 DIRECTORS AND EMPLOYEES A) DIRECTORS REMUNERATION


2010 $000 2009 $000

Business review

Fees to Non-Executive Directors Salaries Benefits(a) Bonuses(b) Share-based payments(c) Fees, benefits and share-based payments in respect of former Directors

2 265 3 732 253 3 720 9 692 65 19 727

2 057 3 570 261 3 763 10 648 303 20 602

(a) In 2010, three Directors (2009 three) had pension benefits accruing under defined benefit schemes. (b) Bonus figures for 2010 represent payments under the Annual Incentive Scheme (AIS) in respect of the 2010 incentive year which will be made in 2011. Bonuses for 2010 include remuneration to be given in the form of shares under the Voluntary Bonus Deferral Plan. Bonus figures for 2009 represent payments under the AIS in respect of the 2009 incentive year which were made in 2010. Bonuses exclude remuneration given in the form of deferred shares (2010 $1 165 000; 2009 $856 000). (c) Share-based payments include a charge for deferred shares awarded to the Directors under the AIS in respect of the previous incentive year.

Corporate governance

B) KEY MANAGEMENT COMPENSATION


2010 $m 2009 $m

Fees to Non-Executive Directors Salaries Benefits(a) Bonuses(b) Pension charge Share-based payments(c) Termination payments and payments in lieu of notice

2 9 10 4 16 41

2 9 9 3 16 6 45

The key management compensation analysed above represents amounts in respect of the Directors and the executive officers, defined as the Group Executive Committee (GEC) and the Company Secretary.
(a) Total benefits of $0.4m were paid to key management in 2010 (2009 $0.4m). (b) Bonus figures for 2010 include payments under the AIS in respect of the 2010 incentive year which will be made in 2011. Bonuses for 2010 include remuneration to be given in the form of shares under the Voluntary Bonus Deferral Plan. Bonus figures for 2009 represent payments under the AIS in respect of the 2009 incentive year which were made in 2010. Bonuses exclude remuneration given in the form of deferred shares (2010 $1 517 000; 2009 $977 000). (c) Share-based payments include a charge for deferred shares awarded to key management under the AIS in respect of the previous incentive year.

Financial statements

C) EMPLOYEE COSTS
The Group 2010 $m 2009 $m

Wages and salaries Social security costs Pension charge(b) Share-based payments (see note 4(E), page 98) Other including incentive schemes(c)
(a)

691 71 109 72 183 1 126 9 1 135

610 60 97 79 109 955 (21) 934

Less: attributable to discontinued operations Continuing operations

Shareholder information

(a) Includes termination payments and payments in lieu of notice made to key management, see (B) above. (b) The pension charge for the year ended 31 December 2010 includes a gain of $18m (2009 $1m charge) for pension curtailments in respect of discontinued operations and a $11m charge (2009 $19m) which is presented within finance costs (see note 6, page 103). (c) For 2010 includes remuneration to be given in the form of shares under the Voluntary Bonus Deferral Plan.

In 2010, employee costs of $958m (2009 $790m) were charged to the income statement and $168m (2009 $165m) were capitalised.

BG Group A year of delivery

www.bg-group.com

98
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

4 DIRECTORS AND EMPLOYEES continued D) AVERAGE NUMBER OF EMPLOYEES DURING THE YEAR
Employed in the UK 2010 Number 2009 Number Employed outside the UK 2010 Number 2009 Number

Exploration and Production Liquefied Natural Gas Transmission and Distribution Discontinued operations

1 723 140 4 93 1 960

1 606 113 12 185 1 916

2 088 486 1 600 38 4 212

1 982 475 1 637 69 4 163

E) SHARE-BASED PAYMENTS
The cost recognised in respect of share-based payments for 2010 was $72m (2009 $79m) of which $64m (2009 $65m) related to equity-settled share-based payment transactions and $8m (2009 $14m) related to cash-settled share-based payments.

Group Share Awards


Details of Group Share Awards under the Groups Long-Term Incentive Plan (LTIP) are given on page 62. In 2010, awards of 3.3m ordinary shares (2009 2.5m ordinary shares) were made. In 2010, 2.0m of these awards were in the form of nil-cost options (2009 1.4m). The costs in respect of these awards are charged to the income statement over the vesting period, based upon the fair value of the shares at the award date. In 2010, the charge in respect of Group Share Awards was $26m (2009 $14m). Dividend equivalents accrue on the award during the vesting period. Accordingly, the fair value of the shares awarded is based on the weighted average market value of the shares on the award date, which was 10.66 in 2010 (2009 10.19). As at 31 December 2010, total awards of 7.0m shares (2009 4.2m) were outstanding, which included nil-cost options over 3.2m shares (2009 1.4m). Nil-cost options can be exercised between three and ten years from the grant date. During the year ended 31 December 2010, 0.2m nil-cost options were forfeited (2009 nil).

Performance Share Awards


Details of Performance Share Awards under the Groups LTIP are given on page 62. Details of the awards to Executive Directors are given on page 67. In 2010, awards of 3.3m ordinary shares (2009 4.9m ordinary shares) were made. In 2010, 2.7m of these awards were in the form of nil-cost options (2009 3.7m). The costs in respect of these awards are charged to the income statement over the vesting period, based upon the fair value of the shares at the award date, adjusted for the probability of market-related performance conditions being achieved. In 2010, the charge in respect of Performance Share Awards was $20m (2009 $11m). The fair value of shares awarded during the year in respect of Performance Share Awards is estimated using a Monte Carlo projection model with the following assumptions: weighted average share price of 10.63 (2009 10.19), exercise price of nil (2009 nil), a risk-free rate of 0.9% (2009 1.9%) and a vesting period of three years (2009 three years). The model also contains assumptions for both the Group and each member of the industry peer group (as set out on page 63) in respect of volatility, average share price growth and share price correlation. Dividend equivalents accrue on the award during the vesting period. The fair value reflects the probability of market performance conditions being achieved. The fair value of shares awarded during the year was 5.97 per share (2009 4.79 per share). The assumptions used in estimating the fair value of shares for the Performance Share Awards are based on US data because most of the companies selected as industry peers are US-based. Expected volatility was determined by calculating the historical volatility of the share price over the previous three-year period. Share price correlation was determined by calculating the historical correlation of the share price over the previous three-year period. Average share price growth was determined from historical growth over the previous year. As at 31 December 2010, total awards of 10.2m shares (2009 7.4m) were outstanding, which included nil-cost options over 6.0m shares (2009 3.5m). Nil-cost options can be exercised between three and ten years from the grant date. During the year ended 31 December 2010, 0.2m nil-cost options were forfeited (2009 0.2m).

Deferred Bonus Awards


Deferred Bonus Awards are made under the Deferred Bonus Plan which operates in conjunction with the Annual Incentive Scheme (AIS) and is described on page 62. In 2010, awards of 0.1m ordinary shares were made (2009 0.2m ordinary shares). The charge to the income statement in respect of these awards was $2m (2009 $3m). The fair value of the shares awarded is based on the market value of the shares at the award date, which was 11.76 (2009 9.98).

Company Share Option Scheme


Details of the Company Share Option Scheme (CSOS) are given on page 64. Details of share options held by Executive Directors under the CSOS are given on page 68. No grants have been made since 2007. The costs of this scheme are charged to the income statement over the vesting period, based upon the fair value of the share options at the grant date and the likelihood of allocations vesting under the scheme. In 2010, the charge in respect of the CSOS was $nil (2009 $20m).

www.bg-group.com

BG Group A year of delivery

99

4 DIRECTORS AND EMPLOYEES continued E) SHARE-BASED PAYMENTS continued Long-Term Incentive Scheme
Details of the Long-Term Incentive Scheme (LTIS) are given on page 64. Details of notional allocations to Executive Directors under the LTIS are given on page 68. No allocations have been made since 2007. The costs of this scheme are charged to the income statement over the vesting period, based upon the fair value of the shares at the award date, adjusted for the probability of market-related performance conditions being achieved. In 2010, the charge in respect of the LTIS was $5m (2009 $8m). As at 31 December 2010, no notional allocations of ordinary shares (2009 2.8m ordinary shares) were outstanding under the LTIS.

Business review

Sharesave Plan
Details of the Sharesave Plan are given on page 65. Details of share options held by Executive Directors under the Sharesave Plan are given on page68. In 2010, grants of 0.4m (2009 0.5m) share options were made under the Sharesave Plan. The costs of this plan are charged to the income statement over the vesting period, based upon the fair value of the share option at the grant date and the likelihood of allocations vesting under the scheme. In 2010, the charge in respect of the Sharesave Plan was $3m (2009 $2m). The fair value of share options granted during the year in respect of the Sharesave Plan is estimated using a Black-Scholes option pricing model with the following assumptions: share price of 11.91 (2009 11.21), exercise price of 10.27 (2009 8.63), dividend yield of 1.0% (2009 1.0%), volatility of 43% (2009 43%), a risk-free rate of 1.53% (2009 1.64%) and an expected life of three years (2009 three years). The fair value of share options granted during the year was 4.13 per share (2009 4.35 per share). Expected volatility was determined by calculating the historical volatility of the Groups share price over the previous three-year period. The expected life used in the model is based on the contractual terms in the Sharesave Plan. Corporate governance

Share Incentive Plan


Details of the Share Incentive Plan (SIP) are given on page 64. In 2010, awards of 0.5m ordinary shares (2009 0.4m ordinary shares) were made in conjunction with the Groups UK Flexible Benefits Plan and Partnership Shares Plan. The charge to the income statement in respect of the award is based on the market value of the shares at the grant date. The fair value of the shares awarded during the year was 11.79 per share (2009 10.66 per share). In 2010, the charge in respect of the SIP was $8m (2009 $7m).

Cash-Settled Share-Based Payments


Cash-settled share-based payments arise when the Group incurs a liability to transfer cash amounts that are based on the price (or value) of the Companys shares. A charge of $nil has been made in respect of cash-settled CSOS awards (2009 $5m), the terms of which are the same as the equity-settled CSOS awards, and a charge of $8m (2009 $9m) has been made in respect of social security costs on employee share option and share plans. During the vesting period, the costs of the cash-settled CSOS awards are charged to the income statement based on the fair value of the share option at the balance sheet date and the likelihood of allocations vesting under the scheme. The charge to the income statement in respect of social security costs has been calculated based on the fair value of the awards at the balance sheet date multiplied by the current employers social security rate. The fair value of the awards that had not vested at the balance sheet date has been estimated using the year-end share price or a Black-Scholes option pricing model, where appropriate. To determine the social security costs in respect of the Performance Share Awards the following assumptions were used: share price of 12.96 (2009 11.22), volatility of 43% (2009 43%), a weighted average risk-free rate of 1.02% (2009 1.45%) and a weighted average expected life of two years (2009 two years). The weighted average fair value of Performance Share Awards at the balance sheet date was 6.48 (2009 5.31). For the Group Share Awards, the fair value of the award was based on the market price of the shares at the balance sheet date. Shareholder information Financial statements

BG Group A year of delivery

www.bg-group.com

100
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

4 DIRECTORS AND EMPLOYEES continued F) ANALYSIS OF SHARE OPTIONS AS AT 31DECEMBER 2010


Number of shares m Weighted average option price Normal exercisable date Weighted average remaining contractual life

Date of grant

Sharesave Scheme and Sharesave Plan options 2005 2006 2007 2008 2009 2010 Company Share Option Scheme options(a) 2001 2002 2003 2004 2005 2006 2007 0.18 0.45 1.09 1.79 3.72 4.55 5.55 2.5634 2.5175 2.7050 3.4733 4.9942 6.8983 7.9200 2011 2012 2013 2014 2015 2016 2017 10mths 1yr 8mths 2yrs 8mths 3yrs 8mths 4yrs 8mths 5yrs 8mths 6yrs 8mths 0.04 0.32 0.60 0.34 0.51 0.39 3.95 5.82 7.16 7.66 8.63 10.27 2010 2011 2011 2012 2013 2014 4mths 1yr 4mths 7mths 1yr 7mths 2yrs 7mths 3yrs 6mths

(a) For CSOS the normal exercisable date given above is the last date that the options are exercisable. This is the tenth anniversary of the grant date. Options can be exercised, subject to performance conditions, from the third anniversary of the grant date.

G) WEIGHTED AVERAGE EXERCISE PRICE OF SHARE OPTIONS


2010 Sharesave Scheme and Sharesave Plan options 2009 Sharesave Scheme and Sharesave Plan options

2010 CSOS options

2009 CSOS options

Outstanding as at 1 January Granted Exercised Forfeited Outstanding as at 31December Exercisable as at 31December

6.86 10.27 4.10 7.09 7.87 3.95

6.11 5.69 7.92 6.04 6.04

5.76 8.63 3.86 6.11 6.86 4.03

5.76 4.76 7.51 6.11 5.16

www.bg-group.com

BG Group A year of delivery

101

4 DIRECTORS AND EMPLOYEES continued H) SUMMARY OF MOVEMENTS IN SHARE OPTIONS


Sharesave Scheme and Sharesave Plan options m

Business review

CSOS options m

2009 Outstanding as at 1 January 2009 Granted Exercised Forfeited Outstanding as at 31December 2009 number Exercisable as at 31December 2009 number Option price range as at 31December 2009 () Option price range for exercised options () Weighted average share price at the date of exercise for options exercised in the year () 2010 Outstanding as at 1 January 2010 Granted Exercised Forfeited Outstanding as at 31December 2010 number Exercisable as at 31December 2010 number Option price range as at 31December 2010 () Option price range for exercised options () Weighted average share price at the date of exercise for options exercised in the year ()

2.3 0.5 (0.5) (0.1) 2.2 0.2 2.74 8.63 2.19 7.16 10.80

45.0 (13.2) (1.4) 30.4 19.9 2.52 7.92 2.52 7.92 10.89

Corporate governance

2.2 0.4 (0.3) (0.1) 2.2 0.1 3.95 10.27 2.74 8.63 11.68

30.4 (10.0) (3.1) 17.3 17.3 2.52 7.92 2.52 7.92 11.84

Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

102
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

5 DISPOSALS, RE-MEASUREMENTS AND IMPAIRMENTS


BG Group has separately identified profits and losses related to disposals, impairments and certain re-measurements of derivative instruments. A reconciliation of results before and after disposals, re-measurements and impairments is given in note 2, page 91.
2010 $m 2009 $m

Other operating income: Re-measurements of commodity based contracts Profits and losses on disposal of non-current assets and impairments Finance income Finance costs Taxation on disposals, re-measurements and impairments Profit/(loss) for the year from continuing operations Profit/(loss) attributable to: Shareholders (earnings) Non-controlling interest

(591) (336) 22 (22) (927) 296 (631) (630) (1)

161 (216) 2 (35) (88) 7 (81) (81)

OTHER OPERATING INCOME


Re-measurements included within Other operating income amount to a charge of $591m (2009 $161m credit), of which a charge of $132m (2009$73m credit) represents non-cash mark-to-market movements on certain long-term UK gas contracts. Whilst the activity surrounding these contracts involves the physical delivery of gas, the contracts fall within the scope of IAS 39 and meet the definition of a derivative instrument. Inaddition, re-measurements include a $459m charge (2009 $88m credit) representing unrealised mark-to-market movements associated with economic hedges. Further information on commodity instruments is given in note 20, page 113.

DISPOSAL OF NON-CURRENT ASSETS AND IMPAIRMENTS 2010


During the year, the Groups Canadian exploration and production assets were classified as held for sale, revalued to fair value less costs to sell based on the sale and purchase agreement price and subsequently sold. This resulted in an impairment charge of $52m (post-tax $37m) and a gain on disposal of $12m (post-tax $7m) in the E&P segment. Following the Groups decision to cease exploration activity and exit the concession in Oman, the Groups Oman exploration assets were fully impaired. This resulted in a charge of $191m in the E&P segment (post-tax $138m). Also during the year, the Group reviewed a number of its licences in the AMEA region and along with its partners decided to relinquish a licence in Nigeria. Following this review, certain exploration and production assets were impaired, resulting in a charge of $173m in the E&P segment (post-tax $127m). In 2010, other plant disposals, write-offs and impairments resulted in a pre-tax credit to the income statement of $68m (post-tax credit $71m).

2009
Following a significant fall in the Henry Hub gas price in 2009, BG Group reviewed the recoverable amount of its Canadian exploration and production business on a value in use basis (using a pre-tax discount rate of 8%). This resulted in an impairment charge of $217m in the E&P segment (post-tax $156m). In 2009, other plant disposals and write-offs resulted in a pre-tax credit to the income statement of $1m (post-tax credit $2m).

FINANCE INCOME AND COSTS


Re-measurements presented in finance income and costs relate primarily to certain derivatives used to hedge foreign exchange and interest rate risk, offset by foreign exchange movements and hedge adjustments on certain borrowings in subsidiaries.

www.bg-group.com

BG Group A year of delivery

103

6 FINANCE INCOME AND COSTS


2010 $m 2009 $m

Business review

Interest receivable Net fair value gains and losses on derivatives and fair value hedge adjustments(b) Finance income
(a)

177 177 (162) (108) 79 (71) (22) (284) (107)

99 2 101 (140) (81) (4) 49 (70) (35) (281) (180)

Interest payable Finance lease charges Other finance charges Interest capitalised(c) Unwinding of discount on provisions and pension obligations(d) Exchange losses Net fair value gains and losses on derivatives and fair value hedge adjustments(b) Finance costs Net finance costs continuing operations

Corporate governance

(a) Interest receivable includes net exchange gains of $104m (2009 $45m). (b) Net fair value gains and losses on derivatives and fair value hedge adjustments comprises $36m gain on hedge adjustments (2009 $13m loss) and $58m loss on interest rate and currency exchange rate derivatives (2009 $15m gain). (c) Finance costs associated with general Group central borrowings used to finance major capital projects are capitalised up to the point that the project is ready for its intended use. The weighted average interest cost applicable to these borrowings is 1.5% per annum (2009 1.9%). Tax relief for capitalised interest is approximately $23m (2009 $14m). (d) Amount in respect of pension obligations represents the unwinding of discount on the plans liabilities offset by the expected return on the plans assets. Also includes the unwinding of discount ondecommissioning, other provisions and receivables.

7 TAXATION
2010 $m 2009 $m

Current tax UK corporation tax at 28% and 50% petroleum revenue tax at 50% adjustments in respect of prior periods less: double tax relief UK tax charge Overseas tax charge adjustments in respect of prior periods Current tax charge Deferred tax Temporary differences Recognition of previously unrecognised deferred tax asset Deferred petroleum revenue tax at 50% Tax charge continuing operations

1 942 42 (234) (776) 974 1 139 151 2 264 (30) (50) 14 2 198

1 886 22 (113) (708) 1 087 1 011 48 2 146 375 (31) 3 2 493

Financial statements

The tax credit relating to disposals, re-measurements and impairments is $296m (2009 $7m). This consists of a tax credit on unrealised re-measurements of $184m (2009 $55m tax charge) and a tax credit on disposals and impairments of $112m (2009 $62m). The total tax charge reconciles with the charge calculated using the statutory rates of UK corporation tax as follows:
2010 $m 2009 $m

Profit before taxation Tax at UK statutory rates on profit Effect on tax charge of: Non tax-deductible or non-taxable items Overseas or petroleum revenue taxes at different rates to UK statutory rates Prior year and other adjustments including unrelieved overseas tax losses Tax charge continuing operations

5 730 1 891 24 439 (156) 2 198

5 955 2 022 95 421 (45) 2 493

Shareholder information

BG Group A year of delivery

www.bg-group.com

104
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

8 DISCONTINUED OPERATIONS
Following the disposal of the Groups power stations in the USA and UK earlier in the year, BG Group announced in September 2010 that it had agreed to sell its interests in Santa Rita and San Lorenzo power stations in the Philippines subject to receiving necessary waivers and consents. Together, these power stations represented the majority of the Groups Power Generation business segment and are considered to be a separate major line of business for BG Group. As a result, these operations have been treated as discontinued. The power businesses that remain with BG Group have been allocated to other business segments based on their activity and location. Comparative information has been restated to reflect the presentation of discontinued operations as a separate line item.

RESULTS FROM DISCONTINUED OPERATIONS


2010 $m 2009 $m

Revenue Operating costs Operating profit Finance (costs)/income Share of post-tax results from joint ventures and associates Profit before tax Taxation Profit after tax Profits and losses on disposal of non-current assets and impairments Taxation Post-tax profits and losses on disposal of non-current assets and impairments Profit/(loss) for the year from discontinued operations

242 (218) 24 (5) 38 57 (5) 52 (178) 94 (84) (32)

456 (418) 38 1 68 107 (10) 97 (139) 50 (89) 8

DISPOSAL OF NON-CURRENT ASSETS AND IMPAIRMENTS 2010


The sale of the Groups investment in Seabank Power Limited for cash proceeds of $327m resulted in a pre and post-tax profit on disposal of $167m. The disposal of the Groups subsidiary undertaking, Premier Power Limited, for cash proceeds of $164m resulted in a pre-tax loss of $24m (post-tax $29m). Following classification as held for sale, the Groups US power assets were revalued to fair value less costs to sell based on the sale and purchase agreement price. This resulted in a pre-tax impairment charge of $325m (post-tax $226m) and a pre and post-tax profit on disposal of $4m. Cash proceeds of $450m were received from this sale. Net assets disposed of in respect of Premier Power Limited and US power assets were as follows:
$m

Intangible assets Property, plant and equipment Net working capital Cash Provisions Current tax liabilities Net assets

3 533 115 23 (41) (13) 620

2009
Following lower than expected demand in the US power market in 2009, BG Group reviewed the recoverable amount of its US power assets on a fair value less costs to sell basis. Based on indicative market data, an impairment charge of $139m was recognised (post-tax $89m).

www.bg-group.com

BG Group A year of delivery

105

8 DISCONTINUED OPERATIONS continued


Cash flows relating to discontinued operations were as follows:
2010 $m 2009 $m

Business review

Loss before taxation Share of post-tax results of joint ventures and associates Depreciation of property, plant and equipment Decrease in provisions Profits and losses on disposal of non-current assets and impairments Finance costs/(income) Movements in working capital Cash generated by operations Income taxes received Net cash inflow from operating activities Net cash (outflow)/inflow from investing activities Net cash inflow from financing activities Net increase in cash and cash equivalents

(121) (38) 30 178 5 (1) 53 53 106 (17) 2 91

(32) (68) 79 (2) 139 (1) (4) 111 111 43 10 164

Corporate governance

9 DIVIDENDS
2010 $m Cents per Pence per ordinary share ordinary share 2009 Cents per Pence per $m ordinary share ordinary share

Prior year final dividend, paid in the year Interim dividend, paid in the year Total dividend paid in the year Proposed final dividend for the year ended 31December 2010(a)

352 332 684 399(a)

10.43 9.82 20.25 11.78

6.73 6.35 13.08 7.31

323 310 633

9.61 9.20 18.81

6.55 5.62 12.17

(a) The proposed final dividend was announced on 8 February 2011 in US Dollars, with a Pounds Sterling equivalent. It is paid to shareholders in Pounds Sterling. The total amount payable in US Dollars has been determined based on the shares in issue as at 31December 2010 that are eligible for the dividend and the average US Dollar/Pound Sterling exchange rate for the three business days prior to the announcement. The total amount payable in US Dollars may vary, depending on movements in exchange rates between February 2011 and May 2011, when the dividend will be paid.

The proposed final dividend for the year ended 31December 2010 of 11.78c takes the 2010 full-year dividend to 21.60c (13.66p) per ordinary share. The final dividend of 10.43c ($352m) in respect of the year ended 31December 2009 was paid to shareholders on 21 May 2010 (28 May 2010 to American Depositary Receipt holders). The interim dividend was paid to all shareholders on 10 September 2010. The proposed final dividend of11.78c per ordinary share ($399m) in respect of the financial year ended 31December 2010 is payable on 20 May 2011 to all shareholders on the register at the close of business on 15 April 2011.

Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

106
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

10 EARNINGS PER ORDINARY SHARE CONTINUING OPERATIONS


Earnings per ordinary share have been calculated by dividing the earnings for the financial year for the continuing operations of the Group of $3383m (2009 $3 311m) by 3 381m (2009 3 363m), being the weighted average number of ordinary shares in issue and ranking for dividend during the year. Earnings per ordinary share excluding disposals, re-measurements and impairments have been presented in order to reflect the underlying performance of the Group.
2010 Basic earnings per ordinary share $m cents 2009 Basic earnings per ordinary share $m cents

Earnings excluding disposals, re-measurements and impairments Disposals, re-measurements and impairments (see note 5, page 102) Earnings including disposals, re-measurements and impairments

4 013 (630) 3 383

118.7 (18.6) 100.1

3 392 (81) 3 311

100.9 (2.4) 98.5

The earnings figure used to calculate diluted earnings per ordinary share is the same as that used to calculate earnings per ordinary share given above, divided by 3 402m (2009 3 389m), being the weighted average number of ordinary shares in issue during the year as adjusted for dilutive equity instruments relating to the employee share schemes. A reconciliation of the weighted average number of ordinary shares used as the denominator in calculating the basic and diluted earnings per ordinary share is given below:
2010 Shares m 2009 Shares m

Basic Dilutive potential ordinary shares: Equity instruments outstanding during the year Diluted basis Diluted earnings per ordinary share (including disposals, re-measurements and impairments) (cents) Diluted earnings per ordinary share (excluding disposals, re-measurements and impairments) (cents)

3 381 21 3 402 99.5 118.0

3 363 26 3 389 97.7 100.1

11 GOODWILL
THE GROUP 2010 $m 2009 $m

Cost as at 1 January Disposals Currency translation adjustments Cost as at 31December Cumulative impairment as at 1 January Charge for impairment (see note 8, page 104) Disposals Cumulative impairment as at 31December Net book value as at 31December

806 (25) 39 820 (25) 25 820

600 206 806 (25) (25) 781

The net book value of goodwill as at 1 January 2009 was $600m. For the purpose of impairment testing, goodwill is allocated to cash generating units (CGU); these represent the lowest level at which goodwill is monitored. The Group tests goodwill annually for impairment or more frequently if there are indications that it might be impaired. As at 31December 2010, $817m of the goodwill recognised related to Comgs (2009 $778m), which is classified within the T&D segment. Comgs is defined as a CGU for impairment testing purposes. No goodwill impairment has been recognised in respect of this CGU. The recoverable amount of the Comgs CGU is determined from value in use calculations, using cash flow projections based on approved financial plans covering a five-year period. The projected cash flows are adjusted for associated risks and are discounted using a nominal rate of 8% (pre-tax). The volume growth rate assumptions used in the plans were based on past performance and managements expectations of market development. The annual volume growth rates in the business plan used to determine cash flows beyond the five-year period are between 5% and 9% and do not exceed the average long-term growth rate for the relevant markets.

www.bg-group.com

BG Group A year of delivery

107

12 OTHER INTANGIBLE ASSETS


THE GROUP Expenditure on unproved gas and oil reserves 2010 $m 2009 $m Service concession asset(a) 2010 $m 2009 $m Other(b) 2010 $m 2009 $m Total 2010 $m 2009 $m

Business review

Cost as at 1 January Additions Disposals and unsuccessful exploration expenditure(d) Transfer to property, plant and equipment Other movements Currency translation adjustments Cost as at 31December Amortisation as at 1 January Charge for the year Charge for impairment (see note 5, page 102) Disposals and transfers Currency translation adjustments Amortisation as at 31December Net book value as at 31December

7 688 1 959(c) (657) (4 284) 205 557 5 468 (66) (327) 267 (126) 5 342

5 257 2 508(c) (545) (1 077) 47 1 498 7 688 (68) 2 (66) 7 622

1 725 160 (3) 88 1 970 (335) (67) (17) (419) 1 551

1 152 120 (4) 457 1 725 (182) (66) 1 (88) (335) 1 390

453 69 (3) 39 558 (175) (62) (21) (258) 300

301 117 (25) 60 453 (106) (38) (31) (175) 278

9 866 2 188 (663) (4 284) 205 684 7 996 (576) (129) (327) 267 (38) (803) 7 193

6 710 2 745 (549) (1 077) 22 2 015 9 866 (288) (104) (68) 1 (117) (576) 9 290

Corporate governance

(a) Recognised following the adoption of IFRIC 12, see note 1, page 89. (b) Other includes contractual rights and software licences at Comgs. Contractual rights are amortised on a straight-line basis over the term of the contract, usually 5 years, and relate to the cost incurred in connecting consumers to the Comgs natural gas distribution system. Other also includes the contractual rights in respect of the purchase of LNG, regasification services and related gas sales at Elba Island in the USA; these rights are amortised on a straight-line basis over the term of the contract and have an average remaining life of 10 years (2009 11 years). (c) Broadly equivalent to cash flows attributable to investing activities arising from exploration and evaluation. (d) Disposals and unsuccessful exploration expenditure includes $382m (2009 $545m) in respect of unsuccessful exploration expenditure written off.

The net book value of Other intangible assets as at 1 January 2009 was $6 422m. Comgs operates under a concession arrangement with the local regulator (ARSESP) to distribute gas to a number of different market segments in the state of So Paulo, Brazil. The Comgs concession is a 30 year franchise, with a potential to extend for a further 20 years when the primary concession period ends in 2029. The arrangements between Comgs and the local regulator are classified as a service concession arrangement in accordance with IFRIC 12. The regulator reviews the maximum margin that can be charged to each market segment every five years. Changes to the tariff primarily reflect the economic balance between investments, operating expenses, cost of capital, inflation, efficiency and changes in the cost of gas purchased by Comgs. At least once a year, the Regulator adjusts the tariff for inflation and gas cost variances. The current tariff structure covering the period 2009 to 2014 was agreed with the Regulator in 2009. There were no significant changes to the concession arrangement in 2010. Under the terms of each tariff review, Comgs commits to a certain level of expenditure necessary to develop and maintain the gas distribution network within the concession area. Comgs is required to use the network infrastructure to supply gas to industrial, commercial, residential, natural gas vehicle, cogeneration and power customers. At the end of the concession period, ownership of the infrastructure passes to the Regulator in exchange for consideration based on the residual value. In accordance with IFRIC 12, which was applicable to the Group for the year ended 31December 2010, all infrastructure associated with the service concession arrangement is recognised as an intangible concession asset with additions to the infrastructure being accounted for as a construction contract with the Regulator. Comparative information has been restated accordingly. During the year, additions to infrastructure of $148m (2009 $114m) were recognised as revenue. No profit or loss has been recognised in respect of additions to infrastructure in 2010 or 2009. Additional information on the adoption of IFRIC 12 can be found in note 1, page 89.

Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

108
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

13 PROPERTY, PLANT AND EQUIPMENT


THE GROUP Land and Mains, services buildings and meters $m $m Plant and machinery $m Motor vehicles and office equipment $m Exploration and production $m

Total $m

Cost as at 1 January 2010 Additions Disposals, transfers and other movements(a) Currency translation adjustments Cost as at 31December 2010 Accumulated depreciation as at 1 January 2010 Charge for the year(b) Charge for impairment(b) (see note 5, page 102 and note 8, page 104) Disposals and transfers Currency translation adjustments Accumulated depreciation as at 31December 2010 Net book value as at 31December 2010 (c)(d)(e)
THE GROUP

152 9 (37) 1 125 (65) (2) 12 2 (53) 72

173 14 7 194 (38) (6) (3) (47) 147

5 193 1 853 (1 433) 10 5 623 (1 228) (174) (325) 993 28 (706) 4 917

1 109 248 (67) 1 290 (385) (165) (12) 12 1 (549) 741


Motor vehicles and office equipment $m

24 148 4 359 3 817 387 32 711 (8 928) (1 679) (37) 250 69 (10 325) 22 386
Exploration and production $m

30 775 6 483 2 280 405 39 943 (10 644) (2 026) (374) 1 267 97 (11 680) 28 263

Land and Mains, services buildings and meters $m $m

Plant and machinery $m

Total $m

Cost as at 1 January 2009 Additions Disposals, transfers and other movements(a) Currency translation adjustments Cost as at 31December 2009 Accumulated depreciation as at 1 January 2009 Charge for the year(b) Charge for impairment(b) (see note 5, page 102 and note 8, page 104) Disposals and transfers Currency translation adjustments Accumulated depreciation as at 31December 2009 Net book value as at 31December 2009(c)(d)(e) Net book value as at 1 January 2009

121 20 11 152 (57) (2) (6) (65) 87 64

141 8 24 173 (30) (5) (3) (38) 135 111

3 991 1 103 (9) 108 5 193 (931) (142) (114) 3 (44) (1 228) 3 965 3 060

741 308 (18) 78 1 109 (236) (124) 4 (29) (385) 724 505

18 871 3 415 765 1 097 24 148 (7 465) (1 373) (149) 622 (563) (8 928) 15 220 11 406

23 865 4 854 738 1 318 30 775 (8 719) (1 646) (263) 629 (645) (10 644) 20 131 15 146

Details of BG Groups gas and oil reserves are given in Supplementary information gas and oil (unaudited) on page 132. Comparative information has been restated following the adoption of IFRIC 12 Service Concession Arrangements, see note 1, page 89.
(a) Includes, within Exploration and production, a transfer from other intangible assets of $4 284m (2009 $1 077m) and an increase in the decommissioning asset of $250m (2009 $107m). (b) Depreciation charge and charge for impairment for the year is attributable to continuing and discontinued operations as follows: Depreciation 2010 $m 2009 $m Impairment 2010 $m 2009 $m

Continuing operations Discontinued operations

1 996 30 2 026

1 567 79 1 646

49 325 374

149 114 263

(c) The Groups net book value includes capitalised interest of $342m (2009 $295m) comprising Exploration and production $281m (2009 $243m) and Plant and machinery $61m (2009 $52m). A deferred tax liability is recognised in respect of this taxable temporary difference at current enacted rates. (d) Includes the net book value of decommissioning assets of $767m (2009 $614m) and expenditure on Plant and machinery and Exploration and production assets under construction of $10 434m (2009 $3 265m). (e) Assets capitalised and held under finance leases included in Plant and machinery are: as at 31December 2010 $m 2009 $m

Cost Accumulated depreciation Net book value

2 647 (465) 2 182

2 138 (355) 1 783

www.bg-group.com

BG Group A year of delivery

109

14 INVESTMENTS
THE GROUP Joint ventures Share of net assets $m Loans $m Associates Share of net assets $m Loans $m Other investments $m Total investments $m

Business review

Carrying value as at 1 January 2010 Investments Disposals, transfers and other loan movements Reclassified as held for sale Share of retained profits less losses during the year(a) Currency translation adjustments and fair value movements Carrying value as at 31December 2010
THE GROUP

773 372 (303) (203) 51 (7) 683


Joint ventures Share of net assets $m

516 7 (117) (6) (20) 380

654 157 65 (62) 814


Associates

986 40 (112) 914

24 9 33(b)

2 953 576 (532) (209) 116 (80) 2 824

Loans $m

Share of net assets $m

Loans $m

Other investments $m

Total investments $m

Carrying value as at 1 January 2009 Investments Disposals, transfers and other loan movements Share of retained profits less losses during the year(a) Currency translation adjustments and fair value movements Carrying value as at 31December 2009

431 318 12 12 773

400 80 (17) 53 516

555 9 74 16 654

943 70 (31) 4 986

16 8 24(b)

2 345 477 (48) 86 93 2 953

Corporate governance

(a) Comprises share of post-tax results for the year of $275m (2009 $246m) from continuing operations and $38m (2009 $68m) from discontinued operations, offset by share of dividends receivable by BG Group of $197m (2009 $228m). (b) Includes an available-for-sale investment in Victoria Petroleum NL.

The Group owns a 16.73% interest in Victoria Petroleum NL, a company listed on the Australian Securities Exchange. This investment is classified as an available-for-sale financial asset and is measured at fair value, with movements in fair value recognised in other comprehensive income. The fair value of the investment has been determined by reference to quoted market prices. As at 31December 2010, the fair value of this investment was $25m (2009 $16m). Analysis of BG Groups share of assets, liabilities, income and expenses in joint ventures and associates is shown below:
Joint ventures as at 31December 2010 $m 2009 $m Associates 2010 $m 2009 $m

Financial statements

Share of assets non-current assets current assets Share of liabilities current liabilities non-current liabilities Share of net assets

1 170 114 1 284 (549) (52) (601) 683


Joint ventures

1 639 286 1 925 (239) (913) (1 152) 773

2 468 566 3 034 (315) (1 905) (2 220) 814


Associates

2 416 444 2 860 (273) (1 933) (2 206) 654

for the year ended 31December

2010 $m

2009 $m

2010 $m

2009 $m

Share of revenue Share of operating costs Share of operating profit Share of finance costs Share of tax Share of post-tax results from continuing operations

248 (182) 66 (1) (15) 50

114 (90) 24 (8) 16

1 066 (696) 370 (48) (97) 225

1 017 (655) 362 (45) (87) 230

Shareholder information

Further information on principal subsidiary undertakings, joint ventures and associates is given in note 29, page 130.

BG Group A year of delivery

www.bg-group.com

110
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

14 INVESTMENTS continued
THE COMPANY Subsidiary undertakings 2010 $m 2009 $m

As at 1 January Capital contribution(a) Currency translation adjustments As at 31December


(a) Represents the fair value of equity instruments granted to subsidiaries employees arising from equity-settled employee share schemes.

3 900 52 (120) 3 832

3 423 54 423 3 900

15 INVENTORIES
THE GROUP as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m

Raw materials and consumables Finished goods for resale

374 281 655

441 328 769

357 451 808

16 TRADE AND OTHER RECEIVABLES


The Group as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m 31Dec 2010 $m The Company 31Dec 2009 $m 1 Jan 2009 $m

Amounts falling due within one year Trade receivables Amounts owed by Group undertakings Amounts owed by joint ventures and associates (see note 26, page 124) Other receivables Prepayments and accrued income Amounts falling due after more than one year Other receivables Prepayments and accrued income

1 845 37 633 3 479 5 994 206 206 6 200

1 686 36 484 2 515 4 721 83 42 125 4 846

1 679 72 515 2 933 5 199 94 42 136 5 335

3 883 3 883 3 883

4 612 4 612 4 612

1 731 1 731 1 731

Total receivables

Trade receivables are stated net of provisions. When management considers the recovery of a receivable to be improbable, a provision is made against the carrying value of the receivable. The movement in this provision is as follows:
THE GROUP 2010 $m 2009 $m

Provision as at 1 January Charge for the year Transfers and other adjustments Provision as at 31December

68 27 (1) 94

46 16 6 68

As at 31December 2010, $441m (2009 $329m) of trade and other receivables were past due but not provided for; an analysis of these receivables is as follows:
THE GROUP 2010 $m 2009 $m

Less than three months past due Between three and six months past due Between six and 12 months past due More than 12 months past due

165 192 18 66 441

176 39 56 58 329

There are no past due or impaired receivables in the Company (2009 $nil).

www.bg-group.com

BG Group A year of delivery

111

17 CASH AND CASH EQUIVALENTS


The Group as at 31 Dec 2010 $m 31 Dec 2009 $m 1 Jan 2009 $m 31 Dec 2010 $m The Company 31 Dec 2009 $m 1 Jan 2009 $m

Business review

Cash at bank and in hand Cash equivalent investments

554 1 979 2 533

483 636 1 119

482 1 003 1 485

1 1

1 1

2 2

Cash and cash equivalents comprise cash in hand, deposits with a maturity of three months or less and other short-term highly liquid investments that are readily convertible into known amounts of cash. The effective interest rates of the Groups cash equivalent investments as at 31December 2010 were between 0.1% and 7.7% (2009 nil and 5.2%). For further information on the interest rate composition of the Groups financial assets see note 20, page 113.

18 ASSETS HELD FOR SALE


The major classes of assets and liabilities classified as held for sale are as follows:
THE GROUP as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m

Corporate governance

Investments in joint venture entities Cash and cash equivalents Assets classified as held for sale Trade and other payables Borrowings Liabilities associated with assets classified as held for sale Net assets classified as held for sale(a)
(a) There were no currency translation adjustments in respect of the above assets and liabilities recorded in the Consolidated statement of comprehensive income.

209 18 227 (7) (97) (104) 123

During 2010, BG Group committed to a plan to dispose of its indirect 40% interests in First Gas Holdings Corporation and FGP Corp which own the Santa Rita and San Lorenzo power stations in the Philippines, respectively. Accordingly, these businesses have been reclassified as held for sale as at 31December 2010, with sales completion expected in 2011 subject to receiving necessary waivers and consents. The results of these businesses have been classified as discontinued operations, see note 8, page 104.

Financial statements

19 BORROWINGS
The Groups treasury policy, capital management and other borrowings information disclosed in the financing and capital section on pages 30 and 31 of the Financial review form part of this note.
THE GROUP as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m

Amounts falling due within one year Commercial paper and bonds Bank loans and overdrafts Obligations under finance leases Amounts falling due after more than one year Bonds and other loans Bank loans Obligations under finance leases

996 215 47 1 258 5 397 663 2 386 8 446 9 704

795 336 27 1 158 2 469 594 1 961 5 024 6 182

69 315 20 404 487 411 1 829 2 727 3 131

Shareholder information

Gross borrowings

BG Group A year of delivery

www.bg-group.com

112
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

19 BORROWINGS continued
As at 31December 2010, Comgs had pledged trade receivables of $23m (2009 $23m) as security against certain of its borrowings. In the event of default under the loan agreements, the lender has the right to receive cash flows from the receivables pledged. Without default the entity will continue to collect the receivables and allocate new receivables as collateral.

MATURITY AND INTEREST RATE PROFILE OF THE GROUPS BORROWINGS


The following tables analyse the Groups gross borrowings. These are repayable as follows:
Gross borrowings (including obligations under finance leases) Fixed rate borrowings 2010 $m 2009 $m Total gross borrowings 2010 $m 2009 $m

Within one year Between one and two years Between two and three years Between three and four years Between four and five years After five years

80 49 53 61 78 1 862 2 183

26 30 34 32 39 1 452 1 613

1 258 645 1 220 191 452 5 938 9 704

1 158 194 622 1 237 147 2 824 6 182

For the purpose of the table above, debt with an initial maturity within one year, such as commercial paper, is treated as floating rate debt. As part of its interest rate risk strategy, the Group has entered into swaps that are designated as fair value or cash flow hedges of interest rate risk. The disclosure above is presented after the effect of these swaps. Further information on the fair value of the swaps is included in note 20, page 113. The effective post-swap interest rates as at 31December 2010 were between 0.4% and 11% (2009 between 0.2% and 11%). For amounts falling due within one year the effective post-swap interest rates were between 0.4% and 11% (2009 between 0.2% and 9%). Post-swap fixed rate borrowings mature between 2011 and 2037 (2009 mature between 2011 and 2037) and the interest rates are not subject to re-pricing prior to maturity.
Obligations under finance leases Amounts due: Minimum lease payments 2010 $m 2009 $m Obligations under finance leases 2010 $m 2009 $m

Within one year Between one and five years After five years Less: future finance charges

146 602 3 263 (1 578) 2 433

103 506 2 916 (1 537) 1 988

47 215 2 171 2 433

27 133 1 828 1 988

The Group has finance lease obligations in respect of LNG ships and infrastructure. These lease obligations expire between 2024 and 2037 (2009 expire between 2024 and 2037).

CURRENCY COMPOSITION OF THE GROUPS BORROWINGS


The following table analyses the currency composition of the Groups borrowings:
2010 $m 2009 $m

Currency: Pound Sterling US Dollar Euro Brazilian Real Other

2 785 4 013 2 131 715 60 9 704

1 662 2 393 1 168 906 53 6 182

The disclosure above does not include the impact of certain currency swaps as these are separately recognised under IAS 39 and presented in note 20, page 113. As at 31December 2010, the Group had swapped $1 957m (2009 $849m) of Pound Sterling borrowings into US Dollars, $1 027m (2009 $1 084m) of Euro borrowings into Pounds Sterling, $1 104m (2009 $71m) of Euro borrowings into US Dollars, $156m (2009 $11m) of US Dollar borrowings into Brazilian Reais and $50m (2009 $48m) of other currencies into US Dollars.

www.bg-group.com

BG Group A year of delivery

113

19 BORROWINGS continued COMPOSITION OF THE GROUPS UNDRAWN COMMITTED FACILITIES


The Group has undrawn committed borrowing facilities, in respect of which all conditions have been met, as follows:
Expiring: 2010 $m 2009 $m

Business review

Within one year Between one and two years Between two and three years After five years

1 200 2 320 190 3 710

374 1 090 1 040 286 2 790

20 FINANCIAL INSTRUMENTS TREASURY INSTRUMENTS


The Group is exposed to credit risk, interest rate risk, exchange rate risk and liquidity risk. As part of its business operations, the Group uses derivative financial instruments (derivatives) in order to manage exposure to fluctuations in interest rates and exchange rates. The Group enters into interest rate derivatives to manage the composition of floating and fixed rate debt. The Group enters into currency derivatives to hedge certain foreign currency cash flows and to adjust the currency composition of its assets and liabilities. Certain agreements are combined foreign currency and interest swap transactions, described as cross-currency interest rate swaps. The Groups policy is to enter into interest or exchange rate derivatives only where these are matched by an underlying asset, liability or transaction. Further information on treasury risks is contained in the Principal risks and uncertainties section, pages 34 to 39.

Corporate governance

COMMODITY INSTRUMENTS
Within the ordinary course of business the Group routinely enters into sale and purchase transactions for commodities. The majority of these transactions take the form of contracts that were entered into and continue to be held for the purpose of the receipt or delivery of the commodity in accordance with the Groups expected sale, purchase or usage requirements. Such contracts are not within the scope of IAS 39. Certain long-term gas sales contracts in the UK fall within the scope of IAS 39. These contracts include pricing terms that are based on a variety of commodities and indices. They are recognised in the balance sheet at fair value with movements in fair value recognised in the income statement. Certain short-term market traded contracts for the purchase and subsequent resale of third-party commodities are within the scope of IAS 39 and are recognised in the balance sheet at fair value with movements in fair value recognised in the income statement. The Group uses various commodity based derivative instruments to manage some of the risks arising from fluctuations in commodity prices. Such contracts include physical and net-settled forwards, futures, swaps and options. Where these derivatives have been designated as cash flow hedges of underlying commodity price exposures, certain gains and losses attributable to these instruments are deferred in other comprehensive income and subsequently recognised in the income statement when the underlying hedged transaction crystallises. Commodity derivatives that are not part of a hedging relationship are recognised in the balance sheet within Other commodity derivatives at fair value, with movements in fair value recognised in the income statement. Further information on commodity price exposure is contained in the Principal risks and uncertainties section, pages 34 to 39.

Financial statements

AMOUNTS RECOGNISED IN RESPECT OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE


THE GROUP as at Included on the balance sheet: 31December 2010 Assets $m Liabilities $m 31December 2009 Assets $m Liabilities $m 1 January 2009 Assets $m Liabilities $m

Interest rate derivatives Currency exchange rate derivatives Cross-currency interest rate derivatives Long-term UK gas contracts Other commodity derivatives

146 363 24 300 833

(79) (221) (169) (432) (1 426) (2 327)

147 653 42 1 401 2 243

(23) (512) (19) (305) (1 380) (2 239)

27 1 421 10 2 098 3 556

(1 070) (139) (348) (1 291) (2 848)

Shareholder information

As at 31December 2010, the Group also held non-derivative available-for-sale financial assets of $25m (2009 $16m) which are recognised in the balance sheet at fair value. As at 31December 2010, the Group had deposited cash of $437m (2009 $245m) and received cash of $3m (2009 $92m) in respect of collateral and margin payments associated with the use of commodity derivatives.

BG Group A year of delivery

www.bg-group.com

114
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

20 FINANCIAL INSTRUMENTS continued


Derivative financial instruments classified as held-for-trading are presented within current assets and current liabilities. All other derivative financial instruments are classified as current or non-current according to the remaining maturity of the derivative.
2010 Expiring: Assets $m Liabilities $m 2009 Assets $m Liabilities $m

Within one year Between one and five years After five years

550 138 145 833

(1 426) (721) (180) (2 327)

1 635 500 108 2 243

(1 390) (781) (68) (2 239)

The notional principal amounts of derivative financial instruments are as follows:


2010 Within one year $m Between one and five years $m After five years $m Total $m Within one year $m 2009 Between one and five years $m After five years $m Total $m

Expiring:

Interest rate derivatives Currency exchange rate derivatives Cross-currency interest rate derivatives Other commodity derivatives

7 4 367 40 37 589

1 789 1 881 1 655 14 518

3 199 2 610 718

4 995 6 248 4 305 52 825

8 6 031 10 39 104

1 505 3 356 1 518 16 128

1 526 358 1 003

3 039 9 387 1 886 56 235

The notional principal amounts of long-term UK gas contracts are $384m (2009 $460m). The amounts in respect of other commodity derivatives represent the gross combination of notional principals relating to all purchase and sale contracts and accordingly do not show the extent to which these contracts may offset. These notional principal amounts give an indication of the scale of derivatives held, but do not reflect the risks that the Group is exposed to from their use.

VALUATION
All financial instruments that are initially recognised and subsequently re-measured at fair value have been classified in accordance with the hierarchy described in IFRS 7 Financial Instruments: Disclosures.

Fair value measurement hierarchy


The fair value hierarchy, described below, reflects the significance of the inputs used to determine the valuation of financial assets and liabilities measured at fair value. Level 1 fair value measurements are those derived directly from quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 fair value measurements are those including inputs other than quoted prices included within Level 1 that are observable for the asset or liability directly or indirectly. The fair value of the Groups interest rate and currency exchange rate derivatives and the majority of the Groups commodity derivatives are calculated from relevant market prices and yield curves at the balance sheet date and are therefore based solely on observable price information. These instruments are not directly quoted in active markets and are accordingly classified as Level 2 in the fair valuehierarchy. Level 3 fair value measurements are those derived from valuation techniques that include significant inputs for the asset or liability that are not based on observable market data. Where observable market valuations of commodity contracts are unavailable, the fair value on initial recognition is the transaction price and is subsequently determined using the Groups forward planning assumptions for the price of gas, other commodities and indices. Due to the assumptions underlying their fair value, certain long-term UK gas contracts are categorised as Level 3 in the fair value hierarchy. One of the assumptions used for their valuation is that the gas market in the UK is liquid for four years (2009 two years). As at 31December 2010, the average four-year forward price for UK gas was 61p per therm (2009 average two-year forward price of 42p per therm). Beyond this period a seasonally adjusted UK gas price of 45p per therm (2009 45p per therm) has been used, along with an electricity price of 45 per megawatt hour (2009 45 per megawatt hour), subject to annual inflation of 2.0%. The fair values of the long-term commodity contracts are then calculated using the market yield curve at the balance sheet date. Using these assumptions, the change in fair value of long-term UK gas contracts charged to the income statement in the year was $132m (2009 $73m credit).

www.bg-group.com

BG Group A year of delivery

115

20 FINANCIAL INSTRUMENTS continued


As at 31December 2010, the potential change in the fair value of long-term UK commodity contracts, assuming changes in the price assumptions of gas (15p per therm), Brent ($10 per bbl) and electricity (15 per megawatt hour), was $4m (2009 $116m).
THE GROUP as at 31December 2010 Level 1 $m Financial assets Level 2 $m Level 3 $m Total $m Level 1 $m Financial liabilities Level 2 $m Level 3 $m Total $m

Business review

Interest rate derivatives Currency exchange rate derivatives Cross-currency interest rate derivatives Long-term UK gas contracts Other commodity derivatives

42 42

146 363 24 250 783


Financial assets

8 8

146 363 24 300 833

(314) (314)

(79) (221) (169) (406) (1 100) (1 975)


Financial liabilities

(26) (12) (38)

(79) (221) (169) (432) (1 426) (2 327)

as at 31December 2009

Level 1 $m

Level 2 $m

Level 3 $m

Total $m

Level 1 $m

Level 2 $m

Level 3 $m

Total $m

Interest rate derivatives Currency exchange rate derivatives Cross-currency interest rate derivatives Long-term UK gas contracts Other commodity derivatives

8 8

147 653 42 1 375 2 217

18 18

147 653 42 1 401 2 243

(43) (43)

(23) (512) (19) (1 321) (1 875)

(305) (16) (321)

(23) (512) (19) (305) (1 380) (2 239)

Corporate governance

As at 31December 2010, the Group also held available-for-sale financial assets of $25m (2009 $16m), the fair value of which is determined using Level 1 fair value measurements.

Level 3 fair value measurements


The movements in the year associated with financial assets and liabilities, measured at fair value and determined in accordance with Level 3, is shown below.
Long-term UK gas contracts 2010 $m 2009 $m Other commodity derivatives 2010 $m 2009 $m Total 2010 $m 2009 $m

Fair value as at 1 January Total gains or losses recognised in profit or loss Reclassification to Level 2 Settlements Currency translation adjustments Fair value as at 31December

(305) (170) 406 38 5 (26)

(348) (13) 86 (30) (305)

2 6 (4) (8) (4)

46 (18) (5) (21) 2

(303) (164) 402 30 5 (30)

(302) (31) (5) 65 (30) (303)

Financial statements

Reclassifications to Level 2 during 2010 and 2009 are attributable to changes in the observability of market data. One of the assumptions underlying the valuation of long-term UK gas contracts is the liquidity in the UK gas market. Following a period of increased activity, the assumed period of liquidity in the UK gas market as at 31December 2010 was increased from two years to four years, resulting in a transfer of $406m of financial liabilities from Level 3 to Level 2 in the fair value hierarchy. Total gains or losses recognised in profit or loss are presented in other operating income. All of the gains or losses for the period are related to financial assets and liabilities held at 31December 2010. All of the gains or losses for the period ended 31December 2009 related to financial assets and liabilities held at 31December 2009. A reasonably foreseeable change in the valuation assumptions underlying other commodity derivatives classified as Level 3 would not significantly change their fair value measurement.

Shareholder information

BG Group A year of delivery

www.bg-group.com

116
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

20 FINANCIAL INSTRUMENTS continued FAIR VALUE ADJUSTMENTS ON FINANCIAL INSTRUMENTS


THE GROUP Included in the income statement(a): 2010 $m 2009 $m

Interest rate and exchange rate derivatives not in a designated hedge relationship Interest rate derivatives designated as fair value hedges Cross-currency interest rate derivatives designated as fair value hedges Commodity derivatives designated as fair value hedges Ineffectiveness on cash flow hedges Ineffectiveness on net investment hedges Long-term UK gas contracts (see note 2, page 91) Other commodity derivatives not in a designated hedge relationship

(27) (10) (30) 16 (24) (4) (132) (508) (719)

111 (15) 29 44 (3) 73 (10) 229

(a) Includes $70m charge (2009 $53m credit) recognised as Other operating income within Business Performance.

Fair value gains of $6m (2009 $6m) on available-for-sale financial assets are included within other comprehensive income. For further information see note 14, page 109.

HEDGE ACCOUNTING
In line with the Groups risk management policies, certain derivative and non-derivative instruments are designated as hedges of currency, interest rate and commodity price exposures in accordance with IAS 39. Further information can be found in the Principal risks and uncertainties section, pages 34 to 39.

Fair value hedges


As at 31December 2010, the Group held a number of interest rate swaps and cross-currency interest rate swaps designated as hedges of the fair value risk associated with the Groups fixed rate debt. The Group also held a number of commodity derivatives designated as hedges of the fair value risk associated with fixed price firm sales commitments. The hedged items and the related derivatives have the same critical terms to ensure that they are an effective hedge under IAS 39. The fair value of derivative instruments designated as fair value hedges outstanding as at 31December 2010 is $(27)m (2009 $5m). During 2010, adjustments of $20m (2009 $(57)m) have been made to hedged items in respect of the risks being hedged.

Cash flow hedges


The Group has forward commodity contracts, currency exchange rate derivatives and interest rate derivatives designated as hedges of highly probable forecast purchases and sales, and of interest flows on floating rate debt. As at 31December 2010, an unrealised pre-tax loss of $564m (2009 $179m gain) was deferred in other comprehensive income in respect of effective cash flow hedges. The hedged transactions are expected to occur within 27 years (2009 28 years) and the associated gains and losses deferred in other comprehensive income will be released to the income statement as the underlying transaction crystallises. As at 31December 2010, deferred pre-tax losses of $507m (2009 $284m gains) are expected to be released to the income statement within one year. The fair value of derivative instruments designated as cash flow hedges outstanding as at 31December 2010 is $(798)m (2009 $(357)m); these amounts exclude dedesignated cash flow hedges. During 2010, certain forecast commodity sales for which cash flow hedge accounting was used were no longer expected to occur. This resulted in the transfer of an unrealised pre-tax gain of $42m (2009 $71m) from other comprehensive income to the income statement. Page 84 identifies the amounts that have been transferred from other comprehensive income in respect of transactions completed during the year. These items are reported within the income statement or non-current assets to match against the underlying transaction.

Hedges of net investments in foreign operations


As at 31December 2010, certain borrowings and currency derivatives have been designated as hedges of the currency risk associated with net investments in foreign operations. The portion of gains or losses on the hedging instruments determined to be an effective hedge are transferred to other comprehensive income to offset the gains or losses arising on the retranslation of net investments in foreign subsidiaries. The pre-tax loss on effective hedging instruments deferred within other comprehensive income as at 31December 2010 is $138m (2009 $158m). The fair value of financial instruments designated as hedges of net investments in foreign operations outstanding as at 31December 2010 is $1 924m (2009 $730m).

www.bg-group.com

BG Group A year of delivery

117

20 FINANCIAL INSTRUMENTS continued FINANCIAL ASSETS (EXCLUDING SHORT-TERM RECEIVABLES)


The Groups financial assets consist of cash and cash equivalents of $2 533m (2009 $1 119m), loans made to joint ventures and associates of $1 294m (2009 $1 502m), finance lease receivable of $134m (2009 $nil), available-for-sale assets of $25m (2009 $16m), other long-term investments of $8m (2009 $8m), and receivables due after more than one year of $74m (2009 $78m). The currency and interest rate profile of financial assets is as follows:
THE GROUP Fixed rate financial assets $m 2010 Floating rate financial Non-interest assets bearing assets $m $m Total $m Fixed rate financial assets $m 2009 Floating rate financial Non-interest assets bearing assets $m $m Total $m

Business review

Currency: Pound Sterling US Dollar Other

11 186 197

13 2 770 620 3 403

376 39 53 468

400 2 995 673 4 068

124 65 189

21 1 670 370 2 061

392 45 36 473

537 1 780 406 2 723

Corporate governance

Within floating rate financial assets, cash and cash equivalents earn interest at the relevant market rates. Periodic interest rate determinations in respect of floating rate loans to joint ventures and associates generally comprise London Interbank Offered Rate (LIBOR) plus or minus an agreed margin. As at 31December 2010, floating rate loans to joint ventures and associates had an effective interest rate of between 0.97% and 3.29% (2009 between 1.56% and 3.28%) and are expected to expire between 2013 and 2020 (2009 between 2011 and 2023).The maturity profile of non-interest bearing loans to joint ventures and associates cannot be practicably estimated as repayments are based on the performance of the individual joint venture or associate. As at 31December 2010, fixed rate assets include a finance lease receivable of $134m (2009 $nil) which expires in 2016 and has an effective interest rate of 14.5% and other fixed rate receivables of $63m (2009 $189m) which are expected to expire between 2011 and 2019 (2009 between 2011 and 2015) and have effective interest rates of between 6% and 6.92% (2009 6% and 9.95%). The finance lease receivable is associated with an onshore Liquefied Petroleum Gas (LPG) plant in Tunisia.
Finance lease receivable Minimum lease payments 2010 $m 2009 $m Net investment in finance leases 2010 $m 2009 $m

Amounts receivable:

Within one year Between one and five years After five years Less: future finance charges

32 135 122 (155) 134

3 24 107 134

Financial statements

FAIR VALUES OF OTHER FINANCIAL INSTRUMENTS


The following financial instruments are measured at historic or amortised cost:
THE GROUP 2010 Book value $m Fair value $m 2009 Book value $m Fair value $m

Financial instruments held or issued to finance the Groups operations: Short-term borrowings Long-term borrowings Cash and cash equivalents Short-term receivables Short-term payables Other financial liabilities Other financial assets

(1 258) (8 446) 2 533 2 515 (1 449) (61) 1 535

(1 258) (8 691) 2 533 2 515 (1 449) (61) 1 638

(1,158) (5 024) 1 119 2 206 (1 139) (52) 1 604

(1 158) (5 145) 1 119 2 206 (1 139) (52) 1 625

Shareholder information

The fair value of cash and cash equivalents (current asset investments and cash at bank and in hand), short-term receivables and short-term payables approximates book value due to the short maturity of these instruments. The fair values of the fixed rate borrowings and joint venture and associate loans have been estimated based on quoted market prices where available, or by discounting all future cash flows by the relevant market yield curve at the balance sheet date. The fair values of floating rate borrowings and joint venture and associate loans approximate book value as interest rates on these instruments reset on a frequent basis. Fair values have not been obtained for the non-interest bearing loans to joint ventures and associates as repayment of these loans is linked to the performance of the individual joint venture or associate and other considerations and it is therefore not practicable to assign fair values.

BG Group A year of delivery

www.bg-group.com

118
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

20 FINANCIAL INSTRUMENTS continued THE COMPANY


The Companys financial instruments are all denominated in Pounds Sterling and consist of short-term receivables of $3 883m (2009 $4 612m), short-term payables of $80m (2009 $100m) and cash and cash equivalents of $1m (2009 $1m). Short-term receivables comprise amounts owed by Group undertakings, of which $3 878m (2009 $4 606m) earns interest at LIBOR minus an agreed margin. The remaining short-term receivables of $5m (2009 $6m) are non-interest bearing. Short-term payables are contractually payable within one year and are non-interest bearing. The fair value of the financial instruments approximates book value.

FINANCIAL RISK FACTORS


The principal financial risks arising from financial instruments are commodity price risk, exchange rate risk, interest rate risk and credit and liquidity risk. A description of these principal risks is outlined in the Principal risks and uncertainties section, pages 34 to 39. Additional quantitative information and market sensitivities in relation to certain principal market risks are included in the section below.

Liquidity risk
The Group limits the amount of borrowings maturing within any specific period and the Groups financial assets are primarily held as short-term, highly liquid investments that are readily convertible into known amounts of cash. These measures keep liquidity risk low. The Group proposes to meet its financial commitments from both the operating cash flows of the business and from use of the money and capital markets, including existing committed lines of credit. The undiscounted contractual cash flows receivable/(payable) under financial instruments as at the balance sheet date are as follows:
THE GROUP as at 31December 2010 Within one Between one year and two years $m $m Between two and five years $m After five years $m

Total $m

Non-derivative financial liabilities Borrowings Short-term payables Other financial liabilities Outflows from derivative financial instruments Currency and interest rate derivatives Gross-settled commodity derivatives Net-settled commodity derivatives

(1 627) (1 449) (3 076) (4 474) (1 349) (510) (6 333) 12 648 3 239

(1 013) (1 013) (993) (334) (276) (1 603) 2 748 132

(2 815) (2 815) (1 451) (231) (7) (1 689) 3 510 (994)

(8 392) (61) (8 453) (2 249) (8) (2 257) 3 808 (6 902)

(13 847) (1 449) (61) (15 357) (9 167) (1 922) (793) (11 882) 22 714 (4 525)

Non-derivative financial assets and inflows from derivative financial instruments Total as at 31December 2010

as at 31December 2009

Within one Between one year and two years $m $m

Between two and five years $m

After five years $m

Total $m

Non-derivative financial liabilities Borrowings Short-term payables Other financial liabilities Outflows from derivative financial instruments Currency and interest rate derivatives Gross-settled commodity derivatives Net-settled commodity derivatives

(1 326) (1 139) (2 465) (6 183) (2 041) (514) (8 738) 14 012 2 809

(425) (425) (2 614) (517) (199) (3 330) 4 693 938

(2 568) (2 568) (2 480) (142) (147) (2 769) 4 475 (862)

(4 084) (52) (4 136) (888) (888) 3 338 (1 686)

(8 403) (1 139) (52) (9 594) (12 165) (2 700) (860) (15 725) 26 518 1 199

Non-derivative financial assets and inflows from derivative financial instruments Total as at 31December 2009

www.bg-group.com

BG Group A year of delivery

119

20 FINANCIAL INSTRUMENTS continued Credit risk


Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures of commercial counterparties including exposures in respect of outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum long-term credit rating of A are normally accepted as a counterparty, and credit limits are established based on credit ratings and other assessment factors. If a commercial counterparty is independently credit rated, the rating is used to determine credit quality and limits. If there is no independent credit rating, credit quality is assessed in accordance with credit policies which take account of the counterpartys financial position and other factors. Exposures are monitored by the relevant Group businesses and at a consolidated Group level. As at 31December 2010, the Groups maximum credit risk exposure (after the impact of any netting arrangements) under interest rate related derivatives was $104m (2009 $115m), currency derivatives $123m (2009 $258m) and commodity related derivatives $292m (2009 $639m). The Groups credit risk exposure under short-term receivables and other financial assets is represented by the book values. The Group has no significant concentration of credit risk, with exposures spread over a large number of counterparties and customers.

Business review

Market risk
Financial instruments used by the Group that are affected by market risks primarily comprise cash and cash equivalents, borrowings and derivative contracts. The principal market variables that affect the value of these financial instruments are UK and US interest rates, US Dollar to Pound Sterling exchange rates, UK and US gas prices, and Japan Custom-cleared Crude (JCC) and Brent oil prices. The table below illustrates the indicative post-tax effects on the income statement and other comprehensive income of applying reasonably foreseeable market movements to the Groups financial instruments at the balance sheet date.
THE GROUP Market movement 2010 2009 Business Performance 2010 $m 2009 $m Disposals, re-measurements and impairments 2010 $m 2009 $m Other comprehensive income 2010 $m 2009 $m

Corporate governance

UK interest rates US interest rates US$/UK exchange rates UK gas prices US gas prices JCC/Brent prices
THE COMPANY

+ 150 basis points + 100 basis points + 20 cents + 15 pence/therm + 1 $/mmbtu + 10 $/bbl

+ 150 basis points + 100 basis points + 20 cents + 15 pence/therm + 1 $/mmbtu + 10 $/bbl

(20) (9) (5)

(10) (3) (36) (5) (11)

22 (21) (173) (508) (8)

18 (16) (155) (350) 131

(18) 73 209 171 (284)

53 24 34 (326)

UK interest rates

+ 150 basis points

+ 150 basis points

43

50

Financial statements

The above sensitivity analysis is based on the Groups financial assets, liabilities and hedge designations as at the balance sheet date and indicates the effect of a reasonable increase in each market variable. The effect of a corresponding decrease in these variables is approximately equal and opposite. The following assumptions have been made: (a) the sensitivity includes a full years change in interest payable and receivable from floating rate borrowings and investments based on the post-swap amounts and composition as at the balance sheet date; (b) fair value changes from derivative instruments designated as cash flow or net investment hedges are considered fully effective and are recorded in other comprehensive income; (c) fair value changes from derivative instruments designated as fair value hedges are considered fully effective and entirely offset by adjustments to the underlying hedged item; (d) fair value changes from derivatives not in a hedge relationship are recorded in the income statement; and (e) fair value changes from certain long-term UK gas contracts arise entirely from sensitivity to the four-year (2009 two-year) forward price for UK gas. Thelong-term gas price assumptions used in the valuation ofsuch contracts are unaffected by reasonably foreseeable movements in UK gas prices.

Shareholder information

BG Group A year of delivery

www.bg-group.com

120
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

21 TRADE AND OTHER PAYABLES


The Group as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m 31Dec 2010 $m The Company 31Dec 2009 $m 1 Jan 2009 $m

Amounts falling due within one year Trade payables Amounts owed to Group undertakings Amounts owed to joint ventures and associates (see note 26, page 124) Other payables(a) Accruals and deferred income Amounts falling due after more than one year Other payables Accruals and deferred income

809 169 471 2 939 4 388 61 11 72 4 460

790 21 328 3 047 4 186 52 11 63 4 249

832 55 295 4 040 5 222 42 13 55 5 277

66 14 80 80

78 22 100 100

79 19 98 98

Total payables

(a) As at 31 December 2010, the Group includes $38m (2009 $44m) relating to cash-settled share-based payment transactions, of which $15m (2009 $21m) relates to awards that have already vested, and $157m (2009 $124m) relating to amounts provided in 2010 for payments to eligible employees under bonus schemes, including the BG Group Annual Incentive Scheme (AIS).

22 PROVISIONS FOR OTHER LIABILITIES AND CHARGES


THE GROUP Decommissioning 2010 $m 2009 $m Other 2010 $m 2009 $m Total 2010 $m 2009 $m

As at 1 January Charge for the year Unwinding of discount Additions Change in discount rate Disposals Foreign exchange and other adjustments Amounts used Unused provisions credited to the income statement As at 31December

1 154 49 135 115 (12) (13) (4) 1 424

981 40 107 37 (9) (2) 1 154

383 49 9 39 (15) (5) (48) (24) 388

352 26 11 46 (37) (15) 383

1 537 49 58 174 115 (27) (5) (61) (28) 1 812

1 333 26 51 107 83 (46) (17) 1 537

Provisions falling due within one year amount to $117m (2009 $86m). A brief description of each provision together with estimates of the timing of expenditure is given below:

DECOMMISSIONING COSTS
The estimated cost of decommissioning at the end of the producing lives of fields is reviewed at least annually and engineering estimates and reports are updated periodically. Provision is made for the estimated cost of decommissioning at the balance sheet date, to the extent that current circumstances indicate BG Group will ultimately bear this cost. The payment dates of total expected future decommissioning costs are uncertain, but are currently anticipated to be between 2011 and 2043.

OTHER
A provision for onerous contracts was recognised in 2007 in respect of capacity contracts in the Interconnector pipeline, retained following disposal of the Groups 25% equity in Interconnector (UK) Limited. The obligation associated with these contracts extends to 2018. The balance as at 31December 2010 includes provisions for onerous contracts of $191m (2009 $218m), field-related payments of $48m (2009 $6m), insurance costs of $40m (2009 $36m) and costs associated with acquisitions and disposals of $27m (2009 $24m). The payment dates are uncertain, but are expected to be between 2011 and 2018.

www.bg-group.com

BG Group A year of delivery

121

23 DEFERRED TAX
Deferred taxes are calculated in full on temporary differences under the liability method using currently enacted or substantively enacted tax rates. The net movement in deferred tax assets and liabilities is shown below:
THE GROUP 2010 $m 2009 $m

Business review

As at 1 January Disposals (Credit)/charge for the year Credit on fair value movements on hedges taken to other comprehensive income Charge to equity in respect of share-based payments Currency translation adjustments and other movements As at 31December

3 010 (20) (163) (206) 4 (9) 2 616

2 845 290 (252) 127 3 010

An analysis of the movements in deferred tax assets and liabilities is shown below. Deferred tax assets and liabilities are only offset if they relate toincome taxes levied by the same taxation authority and the entity has a legally enforceable right to set off current tax assets against current taxliabilities. Corporate governance
THE GROUP Accelerated capital allowances $m Deferred petroleum revenue tax $m Retirement benefit obligations $m Unused tax losses $m Unremitted earnings $m Other temporary differences $m

Provisions $m

Total $m

Deferred tax assets As at 1 January 2009 Charge/(credit) for the year Currency translation adjustments and other movements As at 31December 2009 Charge/(credit) for the year Credit to equity Currency translation adjustments and other movements As at 31December 2010 Deferred tax liabilities As at 1 January 2009 Charge/(credit) for the year Credit to equity Currency translation adjustments and other movements As at 31December 2009 Disposals Charge/(credit) for the year Currency translation adjustments and other movements As at 31December 2010 Net deferred tax liability as at 31December 2010 Net deferred tax liability as at 31December 2009

(12) (21) (2) (35) 352 44 361 3 051 1 493 250 4 794 (20) 713 (81) 5 406 5 767 4 759

118 3 15 136 14 (4) 146 146 136

(4) 5 (1) (51) 15 (36) (262) (56) (44) (362) 5 (75) (5) (437) (473) (362)

(58) 5 (6) (59) 8 1 (50) (17) (2) (5) (24) (2) (1) (27) (77) (83)

(580) (580) (144) (1 289) (93) (1 526) (363) 1 (1 888) (2 468) (1 526)

10 (11) 1

(36) 3 (10) (43) 29 (202) 3 (213) 199 160 (252) 22 129 (5) (208) 18 (66) (279) 86

(110) (8) (19) (137) (242) (202) 63 (518) 2 955 298 (252) 146 3 147 (20) 79 (72) 3 134 2 616 3 010

Financial statements

The amount of the deferred tax asset of $518m (2009 $137m) expected to be recovered after more than 12 months is $356m (2009 $118m). The deferred tax liability of $3 134m (2009 $3 147m) is shown after the offset of certain deferred tax assets relating to the same fiscal authority; the liability prior to such offset is $6 014m (2009 $5 319m). The net amount expected to be settled after more than 12 months is $3 153m (2009 $3 196m). The aggregate amount of temporary differences associated with undistributed earnings of subsidiaries, joint ventures and associates for which deferred tax liabilities have not been recognised is approximately $4.4bn (2009 $5.0bn). No liability has been recognised in respect of these differences either because no liability is expected to arise on distribution under applicable tax legislation or because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. Shareholder information

BG Group A year of delivery

www.bg-group.com

122
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

23 DEFERRED TAX continued


As at 31December 2010, the Company had a deferred tax asset of $12m (2009 $10m). Deferred tax assets are recognised for deductible temporary differences, unutilised tax losses and unused tax credits to the extent that realisation of the related tax benefit through future taxable income is probable. The Group has unrecognised deductible temporary differences of $714m (2009$1 130m) and unrecognised tax losses of $1 547m (2009 $1 649m) to carry forward against future taxable income. To the extent unutilised, $94m of these losses will expire by 2015. In addition, the Group has unrecognised capital losses of $327m (2009 $326m); these tax losses can only beoffset against specific types of future capital gains. The Group also has unrecognised overseas tax credits of $428m (2009 $688m).

24 CALLED UP SHARE CAPITAL


Number of shares as at 31Dec 2010 m 31Dec 2009 m 1 Jan 2009 m 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m

Issued and fully paid up Equity: Ordinary shares of 10p each

3 606

3 595

3 582

576

574

571

During the year, the Company allotted 10.35m ordinary shares of 10p each (2009 13.72m ordinary shares) with an aggregate nominal value of $1 615 271 (2009 $2 167 082) in connection with exercises of share options issued under the Company Share Option Scheme (CSOS), the Sharesave Scheme and the Sharesave Plan. The consideration received on these allotments amounted to $95m (2009 $99m). At 31December 2010, the Company held 219.5m (2009 222.5m) of its own shares. The market value of these shares as at 31December 2010 was $4 454m (2009 $4 031m). The Company made the following transactions in respect of its own shares: (i) During 2010, the Company purchased 0.1m (2009 0.3m) of its own ordinary shares for the Long-Term Incentive Plan (LTIP). The shares purchased, for aggregate consideration of $2m (2009 $4m) including transaction costs, had a nominal value of $13 476 (2009 $40 062) and represented less than 0.1% (2009 less than 0.1%) of the called up share capital at 31December 2010. (ii) During 2010, the Company transferred 3.0m (2009 3.2m) of its ordinary shares to eligible employees in accordance with the terms of the Share Incentive Plan (SIP), Long-Term Incentive Scheme (LTIS) and the LTIP. The shares transferred had a nominal value of $467 529 (2009 $506 634) and represented approximately 0.1% (2009 0.1%) of the called up share capital at 31December 2010. The cost of shares transferred was $36m (2009 $39m). (iii) The maximum number of shares held during the year was 223.6m ordinary shares (2009 225.7m), representing approximately 6.2% (2009 6.3%) of the called up share capital at 31December 2010, and having a nominal value of $33 322 357 (2009 $36 439 716).

25 COMMITMENTS AND CONTINGENCIES A) CAPITAL EXPENDITURE


As at 31December 2010, the Group had contractual commitments for future capital expenditure amounting to $13 021m (2009 $5 958m) of which $nil (2009 $nil) related to the Company. As at 31December 2010, BGGroups joint ventures and associates had placed contracts for capital expenditure, BGGroups share of which amounted to $890m (2009 $92m). Included in the amount for contractual commitments for future capital expenditure is $2 267m (2009 $2 571m) relating to commitments under operating leases split between amounts due within one year $928m (2009 $1 337m), amounts due between one and five years $1 299m (2009 $1 140m), and amounts due after five years $40m (2009 $94m). As at 31December 2010, the Group had entered into commitments under finance leases commencing after that date of $nil (2009 $996m).

B) DECOMMISSIONING COSTS ON DISPOSED ASSETS


BGGroup has contingent liabilities in respect of the future decommissioning costs of gas and oil assets disposed of to third parties should they fail to meet their remediation obligations. The amounts of future costs associated with these contingent liabilities could be significant. The Group has obtained indemnities and/or letters of credit against the estimated amount of certain of these potential liabilities.

C) FUTURE EXPLORATION AND DEVELOPMENT COSTS


As at 31December 2010, certain petroleum licences and contractual agreements in which BGGroup has an interest, contained outstanding obligations to incur exploration and development expenditure, some of which were firm commitments and others contingent. The uncontracted cost attributable to the Group in respect of these commitments is estimated to be $951m (2009 $1 452m).

www.bg-group.com

BG Group A year of delivery

123

25 COMMITMENTS AND CONTINGENCIES continued D) LEASE COMMITMENTS


Commitments under operating leases to be expensed to the income statement as at 31December were as follows:
THE GROUP Land and buildings 2010 $m 2009 $m Vessels and other 2010 $m 2009 $m Total 2010 $m 2009 $m

Business review

Amounts due: Within one year Between one and five years After five years

59 162 220 441

51 142 207 400

269 761 2 374 3 404

232 276 7 515

328 923 2 594 3 845

283 418 214 915

As at 31December 2010, the Company had no commitments under operating leases (2009 $nil). Certain expenditure under operating leases is recovered from third parties under partnership agreements. Included within Land and buildings are two operating leases over BGGroups headquarters, which are located at 100 Thames Valley Park Drive, Reading, Berkshire, RG6 1PT. The leases expire in 2026. The Group also sub-leases a building at the Lake Charles LNG facility to third parties. Total future minimum lease rentals receivable by the Group under this lease were $2m as at 31December 2010 (2009 $nil). Included within Vessels and other are operating leases over LNG ships and oil tankers. The last of these leases expires in 2014 (2009 2014). The Group sub-leases one of its LNG ships to third parties (2009 one ship). The ship is leased to the Group under a lease included in the table above. Total future minimum lease rentals receivable by the Group under this lease were $1m as at 31December 2010 (2009 $1m). Also included within Vessels and other are operating leases over Floating Production Storage and Offloading (FPSO) vessels related to various drilling campaigns. The last of these leases commences in 2013 and expires in 2033. Corporate governance

E) LEGAL PROCEEDINGS
Criminal charges have been brought in Italy against certain former employees and consultants of BG Group in connection with allegations of improper conduct associated with the authorisation process for the planned Brindisi LNG S.p.A. (Brindisi LNG) regasification terminal. BG Italia S.p.A. (BG Italia), a wholly owned subsidiary of BG Group, has also been charged in relation to some of these allegations under Italian Legislative Decree No. 231/2001, an Italian anti-corruption statute which imposes liability on corporate entities under certain circumstances in the event certain criminal acts are committed by management or employees of the company. Financial statements Charges have also been brought against certain former directors of Brindisi LNG, a wholly owned subsidiary of BG Italia, who are alleged to have unlawfully permitted the occupation and alteration of public land, namely the port area in Brindisi where the regasification terminal is due to be constructed, as a result of improperly authorised permits. The charges in relation to this offence against some of these former directors were extinguished via an Oblazione granted by the court. The decision to grant the Oblazione has been challenged by the Public Prosecutor. The trial in relation to the criminal charges commenced on 4 February 2009. In addition, the Italian authorities may still be carrying out further investigations, the scope of which is unknown. The Municipality of Brindisi, Province of Brindisi and Region of Puglia and three groups of environmentalists (Italia Nostra, Legambiente and World Wildlife Fund WWF Italia) have separately commenced civil claims seeking damages against the accused individuals and against BG Italia. Theseclaims have been brought within the framework of the criminal case. In October 2007, BG Group received formal notification from the Ministry of Economic Development that the original Article 8 authorisation for the construction and operation of Brindisi LNG had been suspended pending the submission by BG Group of a full Environmental Impact Assessment (EIA) and confirmation from the Italian authorities as to the validity of the Article 8 authorisation. On 15 January 2008, BG Group commenced the EIA approval process by submitting an EIA. The EIA was re-published on 7 August 2009. On 1 July 2010, a positive EIA Decree was issued, subject to certain conditions. Several parties have challenged the EIA approval, including Brindisi LNG which is seeking to clarify the accompanying conditions. There are various other ongoing legal proceedings relating to the Brindisi LNG regasification terminal, for example relating to consents necessary for the construction work and environmental procedures. The impact of these legal proceedings cannot yet be quantified but could delay or deny BG Group access to the Brindisi LNG terminal site. BG Karachaganak Ltd, as one of the Karachaganak Contracting Companies (KCC), has made claims against the Republic of Kazakhstan (ROK). An arbitration process has been commenced by the KCC and Karachaganak Petroleum Operating B.V. (KPO). The arbitration relates to certain taxes, fines and penalties paid by KPO and the KCC. The ROK has also commenced arbitration in relation to certain unresolved items of expenditure incurred by the KCC which has led to the ROK making certain claims against the KCC. Both arbitrations are currently suspended while the KCC and the ROK are seeking a negotiated solution. It is not practicable at this time to estimate: the financial effects; indicate the uncertainties relating to either the amounts or timing of any economic inflows or outflows; or the possibility of any reimbursements, in relation to the legal proceedings detailed above.

Shareholder information

BG Group A year of delivery

www.bg-group.com

124
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

25 COMMITMENTS AND CONTINGENCIES continued


The Company and its subsidiaries are, or may from time to time be, in connection with current or past operations, involved in a number of legal or arbitration proceedings, including, for example, claims, suits, actions, investigations and or inquiries relating to commercial, tax, environmental or other matters, with third parties or governmental or regulatory authorities. While the outcome of these matters cannot readily be forseen, it is currently considered that they will be resolved without material effect on the net asset position, as shown in these Financial statements.

F) OTHER CONTINGENT LIABILITIES


The amount of other contingent liabilities as at 31December 2010 (mainly the provision of guarantees, indemnities or warranties to third parties and various legal or arbitration proceedings in connection with the operations of the Company and its subsidiary undertakings) amounted to $2 439m (2009 $1 674m), of which $310m (2009 $320m) related to the Company. BGGroups share of other contingencies in respect of its joint ventures and associates amounted to $nil (2009 $15m).

26 RELATED PARTY TRANSACTIONS


In the normal course of business BGGroup provides goods and services to, and receives goods and services from, its joint ventures and associates. In the year ended 31December 2010, the Group received and incurred the following income and charges from these joint ventures and associates:
2010 Income $m Charges $m 2009 Income $m Charges $m

LNG cargo purchases and sales Shipping and other transportation costs

118 23 141

(834) (9) (843)

126 70 196

(809) (20) (829)

As at 31December 2010, a debtor balance of $37m (2009 $36m) (see note 16, page 110) and a creditor balance of $169m (2009 $21m) (see note 21, page 120) were outstanding with these parties. In addition, BGGroup provides financing to some of these parties by way of loans. As at 31December 2010, loans of $1 294m (2009 $1 502m) were due from joint ventures and associates. These loans are accounted for as part of BGGroups investment in joint ventures and associates and disclosed in note 14, page 109. Interest of $24m (2009 $34m) was charged on these loans during the year at interest rates of between 0.95% and 9.95% (2009 0% and 9.95%). The maximum debt outstanding during the year was $1 461m (2009 $1 502m). A joint venture company provided BGGroup with a financing arrangement during the year. As at 31December 2010, a loan of $97m was due to the joint venture (2009 $99m). The borrowing is classified as a liability held for sale (see note 18, page 111). Interest on the loan of $6m (2009 $6m) was payable during the year at an interest rate of 5.8% (2009 5.8%). BGGroup has a finance lease arrangement with a joint venture company. As at 31December 2010, the obligation was $149m (2009 $153m) (see note 19, page 111). Interest of $9m (2009 $9m) was paid during the year in respect of this lease. The lease expires in 2027. William Backhouse, the son of Peter Backhouse, a non-executive Director, is employed by BG International Limited, a wholly owned subsidiary ofBGGroup plc. Peter Backhouse is regarded as interested in the contract of employment by virtue of his relationship with William Backhouse. Theterms and conditions of William Backhouses employment are consistent with others employed in a similar role. As at 31December 2010, a debtor balance of $3 883m (2009 $4 612m) (see note 16, page 110) and a creditor balance of $66m (2009 $78m) (seenote21, page 120) were outstanding between BGGroup plc and other Group undertakings. In 2010, BGGroup plc received dividends of $nil (2009 $3 294m) from BG Energy Holdings Limited, its subsidiary undertaking. BGGroup plc grants equity instruments to subsidiaries employees in respect of equity-settled employee share schemes. In 2010, the fair value of equity instruments granted under these schemes was $52m (2009 $54m).

www.bg-group.com

BG Group A year of delivery

125

27 PENSIONS AND POST-RETIREMENT BENEFITS


The majority of the Groups UK employees participate in the BG Pension Scheme (BGPS), a defined benefit registered pension plan established under trust. The Trustee is BGGroup Pension Trustees Limited. The BGPS is funded to cover future pension liabilities in respect of service up to the balance sheet date. It is subject to an independent valuation at least every three years, on the basis of which the independent qualified actuary certifies the rate of employers contributions that, together with the specified contributions payable by the employees and proceeds from the BGPSs assets, are expected to be sufficient to fund the benefits payable. For the year ended 31December 2010, the employers contribution rate in respect of most BGPS members was effectively 35.2% of pensionable pay (excluding plan expenses which were met directly by the Company). In addition, 3% of pensionable pay was contributed by most members either directly or by their employer via a salary sacrifice arrangement. A full independent actuarial valuation of the BGPS for funding purposes was completed as at 31March 2008. This showed that the aggregate market value of the plan assets at 31March 2008 was 577m, representing some 83% of the accrued liabilities. The Group made payments of 27m in 2009 and 2010 and intends to make four further payments of 27m in the years to 2014 in order to reduce the plans deficit. Aggregate Company contributions for the year ending 31December 2011 are expected to be 69m. The BG Supplementary Benefits Scheme (BGSBS) provides benefits in excess of the lifetime allowance. This defined benefit plan is an unfunded, unregistered arrangement. There is also an unfunded defined benefit post-retirement employee benefit plan for healthcare in respect of employees of Comgs. With effect from 2 April 2007, new UK employees have been offered membership of a defined contribution stakeholder pension plan, the BGGroup Retirement Benefits Plan (BGRBP). Life assurance and income protection benefits are also provided under separate plans; these benefits are fully insured. Members may choose the rate at which they contribute to the BGRBP, either directly or via salary sacrifice, and the additional employers contribution is determined by the rate that the member selects. A wide range of funds is available from which members may choose how the contributions will be invested. The cost of the BGRBP has been included in the amounts recognised in the consolidated income statement. The Group also has a number of smaller defined contribution and defined benefit plans which are not material in Group terms. Valuations of plan assets and expected liabilities as at 31December 2010 were carried out by independent actuaries in accordance with the requirements of IAS 19. In calculating the charge to the income statement including any recognised actuarial gains and losses, a 10% corridor was applied. This means that a portion of actuarial gains and losses is recognised as income or expense only if it exceeds the greater of: a) 10% of the present value of the defined benefit obligation at that date (before deducting plan assets); and b) 10% of the fair value of any plan assets at that date. These limits are calculated and applied separately for each defined benefit plan at each balance sheet date and the portion of actuarial gains and losses to be recognised in future years for each plan is the excess of actuarial gains and losses over and above the 10% limits divided by the expected average remaining working lives of the employees participating in that plan. The fair value of plan assets, the present value of plan liabilities and the net balance sheet liability were as follows:
as at 31Dec 2010 $m 31Dec 2009 $m 1 Jan 2009 $m

Business review Corporate governance Financial statements

Fair value of plan assets Present value of liabilities Deficit in plans Unrecognised net loss Net balance sheet liability

1 290 (1 635) (345) 85 (260)

1 073 (1 665) (592) 313 (279)

728 (1 055) (327) 71 (256)

Shareholder information

BG Group A year of delivery

www.bg-group.com

126
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

27 PENSIONS AND POST-RETIREMENT BENEFITS continued PLAN ASSETS


Movements in the fair value of plan assets during the period were as follows:
2010 $m 2009 $m

Reconciliation of the fair value of plan assets Fair value of plan assets as at 1 January Movement in year: Expected return on plan assets Actuarial gains Company contributions (including curtailment costs) Employee contributions Transfers in Benefit payments Settlements Foreign exchange movements Fair value of plan assets as at 31December

1 073 85 35 112 2 43 (25) (4) (31) 1 290

728 57 104 105 3 (23) 99 1 073

As at 31December, the fair value of plan assets and expected rates of return were as follows:
2010 Expected rate Percentage of of return(a) plan assets % % Value $m 2009 Expected rate Percentage of of return(a) plan assets % % Value $m

Equities Absolute return strategies Index-linked gilts Corporate bonds Property Money market funds and cash Fair value of plan assets
(a) Long-term expected rate of return.

7.7 7.7 4.0 5.5 7.2 4.0

76 9 4 10 1

980 113 55 124 15 3 1 290

8.1 8.1 4.6 5.7 4.6

74 10 5 10 1

796 107 53 111 6 1 073

The expected rate of return on plan assets has been determined following advice from the funded plans independent actuary and is based on the expected return on each asset class together with consideration of the long-term asset strategy. A real return (relative to price inflation) of 4.1% (a premium of 3.6% over the yield on index-linked gilts) is expected on equities and absolute return strategies. The overall expected rate of return as at 31December 2010 was 7.3%. The actual return on plan assets was $120m (2009 $161m).

www.bg-group.com

BG Group A year of delivery

127

27 PENSIONS AND POST-RETIREMENT BENEFITS continued DEFINED BENEFIT OBLIGATION


Movements in the present value of defined benefit obligations during the period were as follows:
2010 $m 2009 $m

Business review

Reconciliation of the present value of the Defined Benefit Obligation (DBO) Present value of DBO as at 1 January Movement in year: Current service cost Interest cost Employee contributions Actuarial (gains)/losses Benefit payments Transfers in Curtailments Settlements Foreign exchange movements Present value of DBO as at 31December

1 665 88 96 2 (168) (25) 43 (18) (4) (44) 1 635

1 055 64 76 3 324 (23) 5 161 1 665

Corporate governance

As at 31December 2010, $1 466m of the DBO relates to funded defined benefit plans (2009 $1 516m) and $169m relates to wholly unfunded defined benefit plans (2009 $149m). The valuations as at 31December were based on the following assumptions:
2010 BGPS and BGSBS % Comgs healthcare plan % 2009 BGPS and BGSBS % Comgs healthcare plan %

Rate of price inflation and benefit increases(a) Future increases in earnings Discount rate Healthcare cost trend rate
(a) Rate of increase of deferred pensions and pensions in payment in excess of any Guaranteed Minimum Pension element.

3.5 5.0 5.5 n/a

4.5 n/a 10.8 10.0

3.9 5.9 5.7 n/a

4.5 n/a 11.2 10.0

Financial statements

If the discount rate used for the valuation of the BGPS and BGSBS was reduced by 0.1% to 5.4%, the defined benefit obligation would increase by $33m and the service cost for 2011 would increase by $2m. In determining the defined benefit obligation as at 31December 2010 for the BGPS and BGSBS, mortality assumptions are based on the 00 mortality series issued by the Institute and Faculty of Actuaries, appropriate to each members year of birth, with an allowance for projected longevity improvements in line with the CMI Bureaus medium cohort tables, subject to a minimum rate of improvement on the projected mortality rates of 1% per annum. Based on these assumptions, the life expectancies of pensioners on the measurement date and also of pensioners in ten years time are as follows:
Life expectancy of pensioners (years) 31Dec 2010 31Dec 2020

Male age 60 Male age 65 Female age 60 Female age 65

27.6 22.7 30.2 25.1

28.7 23.7 31.1 26.1

Shareholder information

If the life expectancy of a member currently age 60 was increased by one year, with consistent changes for members at other ages, the defined benefit obligation in respect of the BGPS and BGSBS would increase by $33m and the service cost for 2011 would increase by $2m. The defined benefit obligation for the Comgs post-retirement employee benefit plan for healthcare was $109m (2009 $87m). The effect of a one percentage point increase or decrease in the assumed healthcare cost trend rates (with all other assumptions remaining constant) on the aggregate service and interest costs for the Comgs plan would be an increase or decrease of $1m (2009 $1m) and on the defined benefit obligation would be an increase of $13m or a decrease of $11m (2009 $10m increase or $8m decrease).

BG Group A year of delivery

www.bg-group.com

128
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

27 PENSIONS AND POST-RETIREMENT BENEFITS continued INCOME STATEMENT


The following amounts have been recognised in the consolidated income statement in the year to 31December:
2010 $m 2009 $m

Amounts recognised in the consolidated income statement Operating costs: Current service cost Curtailment losses Recognised actuarial loss/(gain) Costs in respect of BGRBP defined contribution plan Total charge to operating costs Net finance costs: Expected return on plan assets Interest on plan liabilities Total charge to finance costs Curtailment (gains)/losses included in profit/loss from discontinued operations Total included within employee costs

88 14 14 116 (85) 96 11 (18) 109

64 4 (2) 11 77 (57) 76 19 1 97

FIVE YEAR HISTORY


The history of experience adjustments is as follows:
for the year ended 31December 2010 $m 2009 $m 2008 $m 2007 $m 2006 $m

Details of experience gains/(losses) for all plans Present value of defined benefit obligations Fair value of plan assets Deficit in the plans Difference between the expected and actual return on plan assets: Amount ($m) Percentage of plan assets (%) Experience gains/(losses) on plan liabilities: Amount ($m) Percentage of the present value of plan liabilities (%) Actuarial gains/(losses) on plan liabilities: Amount ($m) Percentage of the present value of plan liabilities (%)

(1 635) 1 290 (345) 35 2.7 50 3.1 168 10.3

(1 665) 1 073 (592) 104 9.7 2 0.1 (324) 19.5

(1 055) 728 (327) (314) 43.1 288 27.3

(1 577) 1 176 (401) 36 3.1 (14) 0.9 48 3.0

(1 423) 943 (480) 35 3.7 18 1.3 (9) 0.6

www.bg-group.com

BG Group A year of delivery

129

28 NOTES TO THE CASH FLOW STATEMENTS CASH GENERATED BY OPERATIONS


The Group for the year ended 31 December 2010 $m 2009 $m The Company 2010 $m 2009 $m

Business review

Profit before taxation Share of post-tax results of joint ventures and associates Depreciation of property, plant and equipment Amortisation of other intangible assets Share-based payments Dividends received Fair value movements in commodity-based contracts Profits and losses on disposal of non-current assets and impairments(b) Unsuccessful exploration expenditure written off Decrease in provisions for liabilities and retirement benefit obligations Finance income Finance costs Movements in working capital: Decrease in inventories (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Cash generated by operations
(a)

5 609 (313) 2 026 129 60 677 514 382 (54) (177) 289 25 (837) 40 8 370

5 923 (314) 1 646 104 65 (169) 355 545 (71) (102) 281 87 82 (835) 7 597

9 10 (32) (13)

3 323 12 (3 294) (48) (7)

Corporate governance

(a) Loss before taxation from discontinued operations was $121m (2009 $32m). (b) Profits and losses on disposal of non-current assets and impairments include a loss from discontinued operations of $178m (2009 $139m).

The cash flows above are inclusive of discontinued operations (see note 8, page 104).

Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

130
Notes to the accounts continued

Financial statements Annual Report and Accounts 2010

29 PRINCIPAL SUBSIDIARY UNDERTAKINGS, JOINT VENTURES AND ASSOCIATES


The principal subsidiary undertakings, joint ventures and associates listed are those that in the opinion of the Directors principally affect the figuresshown in the Financial Statements. A full list of subsidiary undertakings, joint ventures and associates is included in the Annual Return ofBGGroup plc filed with the Registrar of Companies.

PRINCIPAL SUBSIDIARY UNDERTAKINGS


as at 31December 2010 Country of incorporation Activity Group holding %(a)

BG International (AUS) Limited Partnership QGC Pty Limited (QGC) BG E&P Brasil Ltda. Companhia de Gs de So Paulo (Comgs) BG Bolivia Corporation BG Egypt S.A. BG Exploration and Production India Limited BG Delta Limited BG Energy Capital plc BG Energy Holdings Limited(b) BG Gas Marketing Limited BG Hasdrubal Limited BG International Limited BG International (CNS) Limited BG International (NSW) Limited BG Karachaganak Limited BG Norge Limited BG North Sea Holdings Limited BG Overseas Holdings Limited BG Rosetta Limited BG Trinidad and Tobago Limited BG Trinidad 5(a) Limited BG Tunisia Limited Methane Services Limited Gujarat Gas Company Limited BG Italia Power S.p.A. BG Asia Pacific Pte Limited BG Trinidad Central Block Limited BG Energy Finance, Inc. BG Energy Merchants, LLC BG LNG Services, LLC BG LNG Trading, LLC BG North America, LLC BG Production Company (PA), LLC BG US Production Company, LLC

Australia Australia Brazil Brazil Cayman Islands Cayman Islands Cayman Islands England England England England England England England England England England England England England England England England England India Italy Singapore Trinidad and Tobago USA USA USA USA USA USA USA

Exploration and production Exploration and production Exploration and production Gas distribution Exploration and production Exploration and production Exploration and production Exploration and production Financing company Group holding company LNG marketing Exploration and production Holding company Exploration and production Exploration and production Exploration and production Holding company Exploration and production Exploration and production Holding company Exploration and production Holding company Exploration and production Exploration and production Exploration and production Exploration and production LNG shipping Gas distribution Power generation Exploration and production Exploration and production Financing company Gas trading LNG regasification LNG trading Holding company Exploration and production Exploration and production

100.0 100.0 100.0 72.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 65.1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

(a) There is no difference between the Group holding of ordinary shares and the Groups share of net assets attributable to equity shareholders, except for Comgs where the Groups share of net assets is 60.1%. (b) Shares are held by the Company; others are held by subsidiary undertakings.

www.bg-group.com

BG Group A year of delivery

131

29 PRINCIPAL SUBSIDIARY UNDERTAKINGS, JOINT VENTURES AND ASSOCIATES continued


The distribution of the profits of Comgs is restricted by Corporation Law in Brazil and the companys by-laws which require 5% of the profit for the year to be transferred to the Legal Reserve, until it reaches 20% of the subscribed capital. Distribution of the profits of BGGroups other subsidiary undertakings is not materially restricted. All principal subsidiary undertakings operate in their country of incorporation with the exception of BG Asia Pacific Pte Limited, which operates across several countries; BG Bolivia Corporation, which operates in Bolivia; BG Norge Limited, which operates in the UK and Norway; BG North Sea Holdings Limited, which operates in the UK and Algeria; BG LNG Trading, LLC, which operates in the UK and several other countries worldwide; BG Tunisia Limited, which operates in Tunisia; BG Trinidad and Tobago Limited, which operates in Trinidad and Tobago; BG Trinidad 5(a) Limited, which operates in Trinidad and Tobago; BG Rosetta Limited, which operates in Egypt; BG Egypt S.A., which operates in Egypt; BG Delta Limited, which operates in Egypt; BG Hasdrubal Limited, which operates in Tunisia; BG Karachaganak Limited, which operates in Kazakhstan; BG Exploration and Production India Limited, which operates in India; BG Gas Marketing Limited, which operates in the UK and several other countries worldwide; Methane Services Limited, which operates across several countries; and BG International Limited, which operates in the UK and several other countries worldwide.

Business review

JOINT VENTURES AND ASSOCIATES


as at 31December 2010 Country of incorporation and operation Activity Issued share capital Group holding %

Corporate governance

Joint ventures Dragon LNG Group Limited Mahanagar Gas Limited First Gas Holdings Corporation TGGT Holdings, LLC
(a)

England and Wales India Philippines USA

LNG regasification Gas distribution Power generation Gas distribution

10 000 shares of 0.01 89 341 600 shares of Rupees 10 126 084 100 shares of Peso 10 $40 000 000(b)

50.0 49.8 40.0 50.0

Associates BBPP Holdings Ltda. GNL Quintero S.A. El Behera Natural Gas Liquefaction Company S.A.E. Idku Natural Gas Liquefaction Company S.A.E. Genting Sanyen Power Sdn Bhd Guar B.V. Tupi B.V. Atlantic LNG Company of Trinidad and Tobago Atlantic LNG 2/3 Company of Trinidad and Tobago Unlimited Atlantic LNG 4 Company of Trinidad and Tobago Unlimited

Brazil Chile Egypt Egypt Malaysia Netherlands(d) Netherlands(d) Trinidad and Tobago Trinidad and Tobago Trinidad and Tobago

Gas distribution LNG regasification LNG manufacture LNG manufacture Power generation Leasing Leasing LNG manufacture LNG manufacture LNG manufacture

129 000 000 shares of Real 1 1 000 shares of $nil(c) 30 000 shares of $100 30 000 shares of $100 20 000 000 shares of Ringgit 1 18 000 shares of 1 18 000 shares of 1 243 851 shares of $1 000 139 253 shares of $1 000 222 686 shares of $1 000

33.3 40.0 35.5 38.0 20.0 30.0 25.0 26.0

Financial statements Shareholder information

32.5 28.9

(a) Joint ventures are jointly controlled entities where strategic and operating decisions require unanimous consent of the parties sharing control. (b) TGGT Holdings, LLC did not issue share capital, instead it granted membership interests and the amount above is based on the total amount equal to the contributions of EXCO Operating Company, LP and BG US Gathering Company, LLC. (c) Total issued capital is $195 882 353. The shares have no nominal value. (d) Guar B.V. and Tupi B.V. are incorporated in the Netherlands and operate in Brazil.

BG Group A year of delivery

www.bg-group.com

132

Financial statements Annual Report and Accounts 2010

Supplementary information gas and oil (unaudited)


On 20 December 2007, BGGroup ceased to be a United States Securities and Exchange Commission (SEC) registered company and the Groups SEC reporting obligations also ceased with effect from that date. BGGroup continues voluntarily to use the SEC definition of proved reserves to report proved gas and oil reserves and disclose certain unaudited supplementary information detailed on pages 132 to 138. BGGroup also now uses SEC definitions (introduced by the SEC in 2009) for probable reserves. BGGroups strategy aims to connect competitively priced gas to high-value markets. Hydrocarbon reserves, and gas in particular, are developed in relation to the markets that they are intended to supply. Information in this section is therefore grouped as shown below to reflect the nature of the markets supplied by BGGroup.

UK Atlantic Basin Canada, Egypt, Nigeria, Trinidad and Tobago and the USA Asia and the Middle East Areas of Palestinian Authority, Australia, China, India, Kazakhstan, Oman and Thailand Rest of the World Algeria, Bolivia, Brazil, Italy, Libya, Madagascar, Norway, Poland, Tanzania and Tunisia

The Corporate Reserves Group (CRG) is a central multidisciplinary group of reserves experts with an average of 20 years experience in the oil and gas industry which provides an independent review of all reserves and discovered resources bookings and revisions proposed by Regions and Assets to the Reserves Committee. Head of the Corporate Reserves Group Dr. Carolina Coll has more than 23 years experience in the oil and gas industry. She has a degree in Physics, a PhD in petroleum engineering, and is a member of the Society of Petroleum Engineers (SPE) and the SPE Oil and Gas Reserves Committee. Total additions and revisions to proved reserves during the year were 529 mmboe. This includes revisions due to new data and improved reservoir performance (337 mmboe increase), extensions, discoveries and reclassifications (266 mmboe increase), acquisitions and disposals (12 mmboe decrease) and the net effect of price movements (62 mmboe decrease). Production in the period was 235.7 mmboe. Gas and oil reserves cannot be measured exactly since estimation of reserves involves subjective judgement. Therefore, all estimates are subject to revision. Changes in gas and oil prices in fields subject to Production Sharing Contracts (PSCs) may result in changes to entitlements and therefore proved reserves.

PROVED RESERVES
BGGroup utilises the SEC definition of proved reserves. Proved reserves are those quantities of oil and gas, that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations. Proved developed reserves are those reserves that can be expected to be recovered through existing wells and with existing equipment and operating methods. Proved undeveloped reserves comprise total proved reserves less total proved developed reserves.

PROBABLE RESERVES
BGGroup adopted the SEC definition of probable reserves in 2009. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered. Probable developed reserves are those reserves that can be expected to be recovered through existing wells and with existing equipment and operating methods. Probable undeveloped reserves comprise total probable reserves less total probable developed reserves.

DISCOVERED RESOURCES
Discovered resources are defined by BGGroup as the best estimate of recoverable hydrocarbons where commercial and/or technical maturity is such that project sanction is not expected within the next three years.

RISKED EXPLORATION
Risked exploration resources are defined by BGGroup as the best estimate (mean value) of recoverable hydrocarbons in a prospect multiplied by the chance of success.

TOTAL RESOURCES
Total resources are defined by BGGroup as the aggregate of proved and probable reserves plus discovered resources and risked exploration. Total resources may also be referred to as total reserves and resources.

www.bg-group.com

BG Group A year of delivery

133

A) RESERVES ESTIMATED NET PROVED RESERVES OF NATURAL GAS


UK bcf Atlantic Basin bcf Asia and Middle East bcf Rest of World bcf Total bcf

Business review

As at 31December 2007 Movement during the year: Revisions of previous estimates(b) Extensions, discoveries and reclassifications Production Acquisitions of reserves-in-place Disposals of reserves-in-place As at 31December 2008 Movement during the year: Revisions of previous estimates(b) Extensions, discoveries and reclassifications Production Acquisitions of reserves-in-place Disposals of reserves-in-place As at 31December 2009 Movement during the year: Revisions of previous estimates(b) Extensions, discoveries and reclassifications Production Acquisitions of reserves-in-place Disposals of reserves-in-place As at 31December 2010

1 024 174 4 (182) (4) 1 020 31 65 (157) (29) (90) 930 30 29 (127) (68) 862

4 562 59 (486) (427) 4 135 163 (535) 567 195 4 330 (67) 498 (566) 69 (27) (93) 4 237

2 381 947 183 (210) 866 1 786 4 167 129 (227) (98) 4 069 (159) 786 (229) (113) 285 4 354

1 229 57 102 (87) 72 1 301 168 474 (91) 551 1 852 401 90 (111) 380 2 232

9 196(a) 1 237 289 (965) 866 1 427 10 623(a) 491 539 (1 010) 567 (29) 558 11 181(a) 205 1 403 (1 033) 69 (140) 504 11 685(a)

Corporate governance

Note: Conversion factor of 6 bcf of gas to 1 mmboe.


(a) Estimates of proved natural gas reserves at 31December 2010 include fuel gas of 702 bcf (2009 655 bcf; 2008 668 bcf; 2007 632 bcf). (b) Includes effect of oil and gas price changes on PSCs.

Financial statements

ESTIMATED NET PROVED DEVELOPED RESERVES OF NATURAL GAS


UK bcf Atlantic Basin bcf Asia and Middle East bcf Rest of World bcf Total bcf

As at 31December 2007 As at 31December 2008 As at 31December 2009 As at 31December 2010

807 813 685 640

1 897 1 915 2 394 2 099

2 046 3 040 2 820 2 469

822 1 001 812 776

5 572 6 769 6 711 5 984

ESTIMATED NET PROBABLE RESERVES OF NATURAL GAS


UK bcf Atlantic Basin bcf Asia and Middle East bcf Rest of World bcf Total bcf

Probable developed reserves of natural gas As at 31December 2009 As at 31December 2010 Probable undeveloped reserves of natural gas As at 31December 2009 As at 31December 2010 Total estimated net probable reserves of natural gas As at 31December 2009 As at 31December 2010
(a) Estimates of probable natural gas reserves at 31December 2010 include fuel gas of 934 bcf (2009 595 bcf).

338 264 71 338 335

1 189 881 386 1 002 1 575 1 883

126 21 6 018 6 717 6 144 6 738

441 296 2 165 2 630 2 606 2 926

2 094 1 462 8 569 10 420 10 663(a) 11 882(a)

Shareholder information

BG Group A year of delivery

www.bg-group.com

134

Financial statements Annual Report and Accounts 2010

Supplementary information gas and oil (unaudited) continued

A) RESERVES continued ESTIMATED NET PROVED RESERVES OF OIL


Oil includes crude oil, condensate and natural gas liquids.
UK mmbbl Atlantic Basin mmbbl Asia and Middle East mmbbl Rest of World mmbbl Total mmbbl

As at 31December 2007 Movement during the year: Revisions of previous estimates(a) Extensions, discoveries and reclassifications Production Acquisitions of reserves-in-place Disposals of reserves-in-place As at 31December 2008 Movement during the year: Revisions of previous estimates(a) Extensions, discoveries and reclassifications Production Acquisitions of reserves-in-place Disposals of reserves-in-place As at 31December 2009 Movement during the year: Revisions of previous estimates(a) Extensions, discoveries and reclassifications Production Acquisitions of reserves-in-place Disposals of reserves-in-place As at 31December 2010
(a) Includes effect of oil and gas price changes on PSCs.

167.2 22.0 0.4 (30.5) (8.1) 159.1 31.9 3.1 (29.4) 7.0 12.6 171.7 (2.0) 9.6 (27.9) (20.3) 151.4

13.9 1.2 (2.3) (1.1) 12.8 (0.1) (2.5) (2.6) 10.2 0.6 0.9 (2.0) 0.2 (0.1) (0.4) 9.8

287.4 189.9 6.0 (30.9) 165.0 452.4 (76.6) (31.8) (108.4) 344.0 7.1 (28.2) (21.1) 322.9

37.9 3.2 24.9 (2.2) 25.9 63.8 102.0 47.5 (2.8) 146.7 210.5 235.3 21.3 (5.4) 251.2 461.7

506.4 216.3 31.3 (65.9) 181.7 688.1 57.2 50.6 (66.5) 7.0 48.3 736.4 241.0 31.8 (63.5) 0.2 (0.1) 209.4 945.8

ESTIMATED NET PROVED DEVELOPED RESERVES OF OIL


UK mmbbl Atlantic Basin mmbbl Asia and Middle East mmbbl Rest of World mmbbl Total mmbbl

As at 31December 2007 As at 31December 2008 As at 31December 2009 As at 31December 2010

138.9 125.7 135.5 113.6

9.0 7.7 5.8 5.7

223.5 373.8 285.3 277.5

21.5 25.5 20.5 27.8

392.9 532.7 447.1 424.6

ESTIMATED NET PROBABLE RESERVES OF OIL


UK mmbbl Atlantic Basin mmbbl Asia and Middle East mmbbl Rest of World mmbbl Total mmbbl

Probable developed reserves of oil As at 31December 2009 As at 31December 2010 Probable undeveloped reserves of oil As at 31December 2009 As at 31December 2010 Total estimated net probable reserves of oil As at 31December 2009 As at 31December 2010

66.8 49.3 20.6 66.8 69.9

4.0 2.9 0.2 1.0 4.2 3.9

3.4 4.3 153.0 99.6 156.4 103.9

20.1 14.1 1 505.8 1 650.4 1 525.9 1 664.5

94.3 70.6 1 659.0 1 771.6 1 753.3 1 842.2

www.bg-group.com

BG Group A year of delivery

135

B) STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS


The following tables set out the standardised measure of discounted future net cash flows relating to proved gas and oil reserves and report the causes of changes in the standardised measure of the cash flows relating to reserves. Future cash inflows have been computed by reference to the Groups estimate of future production of net proved gas and oil reserves at the end of each year and estimates of third-party prices. 2010 and 2009 prices are calculated using a 12-month average price in line with the revised SEC methodology effective for the year ended 31December 2009. 2008 price calculations are based on year end prices. The standardised measure of discounted future net cash flow information presented below is not intended to represent the replacement cost or fair market value of the Groups gas and oil properties. The disclosures shown are based on estimates of proved reserves, future production schedules and costs, which are inherently imprecise and subject to revision. The standardised measure is asfollows:
UK $bn Atlantic Basin $bn Asia and Middle East $bn Rest of World $bn Total $bn

Business review

As at 31December 2008: Future cash inflows Future production and development costs Future income tax expenses Future net cash flows 10% annual discount for estimated timing of cash flows As at 31December 2009: Future cash inflows Future production and development costs Future income tax expenses Future net cash flows 10% annual discount for estimated timing of cash flows As at 31December 2010: Future cash inflows Future production and development costs Future income tax expenses Future net cash flows 10% annual discount for estimated timing of cash flows

14.62 (5.94) (5.06) 3.62 (1.07) 2.55 15.95 (7.24) (4.71) 4.00 (1.01) 2.99 18.63 (8.29) (5.72) 4.62 (1.24) 3.38

12.13 (3.29) (3.39) 5.45 (2.07) 3.38 12.68 (4.67) (2.49) 5.52 (2.03) 3.49 14.33 (5.39) (2.73) 6.21 (2.24) 3.97

19.93 (11.10) (2.78) 6.05 (3.03) 3.02 25.94 (12.49) (4.74) 8.71 (4.39) 4.32 31.19 (13.59) (6.26) 11.34 (6.05) 5.29

7.95 (5.48) (0.83) 1.64 (0.55) 1.09 20.70 (11.27) (2.94) 6.49 (3.19) 3.30 48.07 (28.31) (5.54) 14.22 (8.15) 6.07

54.63 (25.81) (12.06) 16.76 (6.72) 10.04 75.27 (35.67) (14.88) 24.72 (10.62) 14.10 112.22 (55.58) (20.25) 36.39 (17.68) 18.71

Corporate governance Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

136

Financial statements Annual Report and Accounts 2010

Supplementary information gas and oil (unaudited) continued

B) STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS continued


The following were the main sources of change in the standardised measure of discounted cash flows in the three accounting years ended 31December 2010:
2010 $bn 2009 $bn 2008 $bn

Standardised measure at the beginning of the year Sale of gas and oil produced net of production costs and other operating costs(a) Net changes in prices and production costs(b) Extensions, discoveries, reclassifications and revisions to previous estimates Changes in estimated future development costs Development costs incurred in the period Acquisitions of reserves-in-place Disposals of reserves-in-place Accretion of discount Net change in income taxes Other(c) Standardised measure at the end of the year(d)
(a) (b) (c) (d) Production costs and other operating costs include lifting, tariff, insurance and royalty costs but not depreciation costs. Includes the effect of foreign exchange movements. 2009 and 2008 includes foreign exchange translation differences following the change in reporting currency. Based on the following: Brent oil price ($/bbl) Henry Hub ($/mmbtu) UK spot gas (p/therm) US$/UK exchange rate

14.10 (6.84) 5.02 8.50 (5.63) 4.07 0.11 (0.03) 2.20 (2.74) (0.05) 18.71

10.04 (6.04) 1.99 5.70 (2.48) 2.74 0.53 (0.12) 1.70 (0.79) 0.83 14.10

19.87 (7.09) (8.56) 7.12 (4.08) 2.44 0.20 2.31 3.34 (5.51) 10.04

2010

2009

2008

79 4.46 42.97 1.55

60 4.24 31.78 1.56

37 5.67 60.25 1.44

C) CAPITALISED COSTS
Capitalised costs incurred using the successful efforts method and net of depreciation were as follows:
UK $m Atlantic Basin $m Asia and Middle East $m Rest of World $m Total $m

As at 31December 2008: Proved gas and oil properties Unproved gas and oil properties Accumulated depreciation Net capitalised costs As at 31December 2009: Proved gas and oil properties Unproved gas and oil properties Accumulated depreciation Net capitalised costs As at 31December 2010: Proved gas and oil properties Unproved gas and oil properties Accumulated depreciation Net capitalised costs

6 106 179 6 285 (4 208) 2 077 6 748 174 6 922 (4 497) 2 425 6 985 215 7 200 (4 703) 2 497

4 543 841 5 384 (1 247) 4 137 6 643 1 132 7 775 (2 101) 5 674 8 476 2 015 10 491 (2 722) 7 769

4 942 3 580 8 522 (1 257) 7 265 6 710 5 064 11 774 (1 518) 10 256 11 927 2 080 14 007 (1 882) 12 125

3 280 657 3 937 (753) 3 184 4 047 1 318 5 365 (878) 4 487 5 323 1 158 6 481 (1 144) 5 337

18 871 5 257 24 128 (7 465) 16 663 24 148 7 688 31836 (8 994) 22 842 32 711 5 468 38 179 (10 451) 27 728

The above table does not include the investment in the joint venture entity TGGT Holdings LLC of $457m (2009 $312m). This company holds gas-gathering and transportation assets associated with the alliance with EXCO Resources, Inc.

www.bg-group.com

BG Group A year of delivery

137

D) COSTS INCURRED IN GAS AND OIL ACTIVITIES


Aggregate costs incurred under the historical cost convention, comprising amounts capitalised to exploration and development and amounts charged to the income statement in respect of exploration and appraisal, were as follows:
UK $m Atlantic Basin $m Asia and Middle East $m Rest of World $m Total $m

Business review

Year ended 31December 2008: Acquisition of properties: Proved Unproved Exploration Development Year ended 31December 2009: Acquisition of properties: Proved Unproved Exploration Development Year ended 31December 2010: Acquisition of properties: Proved Unproved Exploration Development

9 176 386

125 434 1 017

453 3 294 226 849

538 902

453 3 428 1 374 3 154

46 512

898 574 466 839

725 279 715

808 681

898 1 299 1 599 2 747

Corporate governance

79 331

309 1 124 126 1 549

286 1 471

1 926 719

309 1 125 1 417 4 070

The proportion of exploration costs capitalised in 2010 was 73.0% (2009 75.6%; 2008 71.8%). The above table does not include additions to decommissioning provisions which amounted to $250m in 2010 (2009 $107m; 2008 $275m). The above table does not include additions to investments in joint ventures relating to the purchase of TGGT Holdings LLC of $129m (2009 $318m) (see section (C) on page 136). The above table includes the investment in Common Resources LLC of $220m that was subsequently transferred to other intangible assets and property, plant and equipment.

Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

138

Financial statements Annual Report and Accounts 2010

Supplementary information gas and oil (unaudited) continued

E) RESULTS OF OPERATIONS
The results of operations under the historical cost convention and in accordance with IFRS for the gas and oil producing activities (excluding disposals, re-measurements and impairments, other operating income, general office overheads and interest costs) were as follows:
UK $m Atlantic Basin $m Asia and Middle East $m Rest of World $m Total $m

Year ended 31December 2008: Revenues Production costs Other operating costs Exploration expenses Depreciation Other costs Taxation Results of operations Year ended 31December 2009: Revenues Production costs Other operating costs Exploration expenses Depreciation Other costs Taxation Results of operations Year ended 31December 2010: Revenues Production costs Other operating costs Exploration expenses Depreciation Other costs Taxation Results of operations

4 507 (504) (1) (99) (527) (15) 3 361 (1 734) 1 627 2 962 (447) (115) (362) (95) 1 943 (974) 969 3 004 (455) (44) (339) (55) 2 111 (1 093) 1 018

2 150 (120) (8) (358) (378) (6) 1 280 (665) 615 1 361 (156) (5) (448) (633) (19) 100 (127) (27) 1 750 (245) (10) (94) (762) (117) 522 (388) 134

3 137 (380) (214) (100) (290) (132) 2 021 (842) 1 179 2 291 (397) (155) (79) (246) (133) 1 281 (481) 800 2 596 (501) (160) (109) (317) (145) 1 364 (556) 808

1 025 (100) (109) (286) (74) (192) 264 (128) 136 799 (139) (106) (293) (132) (159) (30) (27) (57) 1 208 (185) (159) (518) (270) (212) (136) 211 75

10 819 (1 104) (332) (843) (1 269) (345) 6 926 (3 369) 3 557 7 413 (1 139) (266) (935) (1 373) (406) 3 294 (1 609) 1 685 8 558 (1 386) (329) (765) (1 688) (529) 3 861 (1 826) 2 035

Net royalty payments are classified as Other operating costs in the table above. Revenues, representing gas and oil sold, include intra-group sales at contract prices of $777m for the year ended 31December 2010 (2009 $414m; 2008 $731m). The accretion interest expense resulting from changes in the liability for decommissioning due to the passage of time, which is not included in the table above, was $49m (2009 $40m; 2008 $42m).

www.bg-group.com

BG Group A year of delivery

139

Historical production (unaudited)


Gas production (net) bcf 2010 2009 2008 Oil & liquids production (net) 000 barrels 2010 2009 2008

Business review

Australia Bolivia Brazil Canada Egypt India Kazakhstan Thailand Trinidad and Tobago Tunisia UK USA Total(a)

46.0 31.7 3.2 317.4 47.4 87.0 49.1 177.1 79.5 126.5 68.7 1 033.6

34.2 23.4 10.0 338.7 54.9 94.4 43.2 174.9 67.9 157.3 11.6 1 010.5

5.2 28.4 0.5 332.0 66.0 89.6 49.3 153.7 58.1 181.9 964.7

30 1 010 1 590 20 1 160 3 250 23 310 1 590 690 2 750 27 940 120 63 460 2010 235.7

60 800 710 1 640 4 530 25 720 1 480 770 1 330 29 390 40 66 470 2009 234.9

10 930 1 870 4 460 24 840 1 560 450 1 310 30 470 65 900 2008 226.7

Corporate governance

Total production of gas, oil & liquids (mmboe)(b)


(a) Production volumes include fuel gas. (b) Conversion factor of 6 bcf of gas to 1 mmboe.

Financial statements Shareholder information

BG Group A year of delivery

www.bg-group.com

140

Financial statements Annual Report and Accounts 2010

Five-year financial summary (unaudited)


Consolidated income statement
for the year ended 31December 2010 $m 2009 Restated(a) $m 2008 Restated(a) $m 2007 Restated(a) $m 2006 Restated(a) $m

Group revenue and other operating income Operating costs Profit and losses on disposal of non-current assets and impairments Operating profit Finance income Finance costs Share of post-tax results from joint ventures and associates Profit before tax Taxation Profit for the year from continuing operations Profit/(loss) for the year from discontinued operations Profit attributable to: Shareholders (earnings) Non-controlling interest Earnings per ordinary share continuing operations (cents) Basic Diluted Earnings per ordinary share discontinued operations (cents) Basic Diluted

16 772 (10 874) (336) 5 562 177 (284) 275 5 730 (2 198) 3 532 (32) 3 351 149 3 500 100.1 99.5 (1.0) (1.0)

15 828 (9 723) (216) 5 889 101 (281) 246 5 955 (2 493) 3 462 8 3 319 151 3 470 98.5 97.7 0.2 0.2

23 536 (13 546) (45) 9 945 500 (363) 226 10 308 (4 401) 5 907 105 5 964 48 6 012 175.0 173.2 3.1 3.1

15 718 (10 135) 37 5 620 305 (248) 230 5 907 (2 447) 3 460 142 3 494 108 3 602 99.0 98.1 4.2 4.2

13 757 (8 007) (96) 5 654 234 (188) 164 5 864 (2 666) 3 198 120 3 236 82 3 318 90.0 89.3 3.5 3.4

Consolidated balance sheet


as at 31December 2010 $m 2009 Restated(a) $m 2008 Restated(a) $m 2007 Restated(a) $m 2006 Restated(a) $m

Non-current assets Current assets Assets classified as held for sale Total assets Current liabilities Non-current liabilities Liabilities associated with assets classified as held for sale Total liabilities Net assets Equity Total shareholders equity Non-controlling interest in equity Total equity

40 107 9 965 227 50 299 (8 886) (14 625) (104) (23 615) 26 684 26 328 356 26 684

34 025 8 417 42 442 (8 313) (10 899) (19 212) 23 230 22 909 321 23 230

26 104 9 834 35 938 (9 328) (8 086) (17 414) 18 524 18 343 181 18 524

20 553 10 082 30 635 (7 731) (8 259) (15 990) 14 645 14 382 263 14 645

16 565 8 101 166 24 832 (5 517) (6 596) (66) (12 179) 12 653 12 453 200 12 653

Other information
as at 31December 2010
(b)

2009 Restated(a)

2008 Restated(a)

2007 Restated(a)

2006 Restated(a)

Net (borrowings)/funds Gearing ratio(c) Debt/equity ratio(d) Employee numbers (headcount)

$m % % thousands

(6 973) 20.1 25.2 6.2

(4 775) 17.0 20.4 6.2

(1 397) 7.1 7.7 5.9

50 (0.3) (0.3) 5.1

(202) 1.6 1.6 4.8

(a) See note 1, page 89. (b) Net borrowings/funds comprise cash and cash equivalents, finance leases, currency and interest rate derivative financial instruments and short and long-term borrowings. (c) Gearing ratio represents net borrowings/funds as a percentage of total shareholders funds (excluding balances associated with commodity financial instruments and related deferred tax) plus net borrowings/funds. (d) Debt/equity ratio represents net borrowings/funds as a percentage of total shareholders funds (excluding balances associated with commodity financial instruments and related deferred tax).

www.bg-group.com

BG Group A year of delivery

141

Consolidated cash flow statement


for the year ended 31December 2010 $m 2009 Restated(a) $m 2008 Restated(a) $m 2007 Restated(a) $m 2006 Restated(a) $m

Business review

Cash generated by operations Income taxes paid Net cash inflow from operating activities Cash flows from investing activities Dividends received Proceeds from disposal of subsidiary undertakings and investments Proceeds from disposal of property, plant and equipment and intangible assets Purchase of property, plant and equipment and intangible assets Loans to and repayments from joint ventures and associates Business combinations and investments Net cash outflow from investing activities Cash flows from financing activities Net interest (paid)/received Dividends paid Dividends paid to non-controlling interest Net proceeds from issue of new borrowings Repayment of borrowings Issue of shares Purchase of own shares Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents

8 370 (1 984) 6 386 198 468 897 (8 397) 92 (529) (7 271) (229) (680) (108) 3 559 (348) 95 (2) 2 287 1 402

7 597 (2 065) 5 532 227 5 (6 767) (101) (1 094) (7 730) (166) (633) (57) 2 904 (332) 99 (4) 1 811 (387)

11 858 (3 575) 8 283 271 30 4 (5 415) (230) (3 254) (8 594) (24) (667) (66) 542 (715) 48 (392) (1 274) (1 585)

7 402 (1 900) 5 502 299 908 6 (3 450) (165) (977) (3 379) 6 (530) (75) 888 (581) 103 (1 117) (1 306) 817

6 112 (1 776) 4 336 358 16 93 (2 404) (121) (127) (2 185) 25 (447) (69) 401 (357) 49 (1 789) (2 187) (36)

Corporate governance

Other information
for the year ended 31December 2010 $m 2009 Restated(a) $m 2008 Restated(a) $m 2007 Restated(a) $m 2006 Restated(a) $m

Closing total equity Less: Closing commodity financial instruments net of associated deferred tax Closing net (borrowings)/funds Closing capital employed Average capital employed(b) Profit before tax(c) Less: Finance (costs)/income on net (borrowings)/funds Taxation applied at the Groups effective rate Post-tax return Pre-tax return on average capital employed(d) Post-tax return on average capital employed(d) % %

26 684 (958) (6 973) 34 615 31392 6 769 (60) 6 829 (2 629) 4 200 21.8 13.4

23 230 (165) (4 775) 28 170 23 914 6 138 (104) 6 242 (2 622) 3 620 26.1 15.4

18 524 263 (1 397) 19 658 17 349 10 134 151 9 983 (4 243) 5 740 57.5 33.1

14 645 (444) 50 15 039 13 990 6 255 51 6 204 (2 668) 3 536 44.3 25.3

12 653 (86) (202) 12 941 12 212 5 431 (37) 5 468 (2 390) 3 078 44.8 25.2

Financial statements

(a) See note 1, page 89. (b) Average capital employed is calculated as the average of the opening and closing capital employed balances for the year. (c) Profit before tax excludes disposals, re-measurements and impairments and includes pre-tax share of results from joint ventures and associates. (d) Return on average capital employed represents profit (excluding disposals, re-measurements and impairments), excluding net finance income/costs on net funds/borrowings, as a percentage ofaverage capital employed. The above table presents this before and after taxation applied at the Groups effective tax rate.

Shareholder information

BG Group A year of delivery

www.bg-group.com