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London Evening Standard: BG set to bid in £1.7bn First Calgary: “News of its interest comes amid renewed speculation that BG Group may itself be a takeover target for the big guns in the industry, most notably Shell…” ( 5 April 05


Steve Hawkes

5 April 2005


BG GROUP and German rival E.ON Ruhrgas are considering bids for First Calgary, the Aim-listed Canadian oil and gas explorer which has put itself on the auction block at £1.7bn.


The two gas giants are set to go head-to-head with oil companies looking to get their hands on the huge energy reserves First Calgary holds in the Algerian desert.


A source told the Evening Standard that BG Group has already appointed bankers to evaluate the company. E.ON Ruhrgas is understood to have only recently joined the bidding process. Both refused to comment.


BG is flush with cash after finally selling its $1.8bn (£960m) interest in the Kashagan oil field in Kazakhstan following a two-year delay. It expects to get the money tomorrow.


The former British Gas group is building up its oil and gas portfolio worldwide and has a leading position in liquefied natural gas (LNG). It bought into the oil boom in Mauritania, West Africa, a year ago by acquiring a $137m stake in several offshore fields.


News of its interest comes amid renewed speculation that BG Group may itself be a takeover target for the big guns in the industry, most notably Shell, following yesterday's $16.8bn acquisition of US independent Unocal by ChevronTexaco. BG Group chief executive Frank Chapman, who spent 18 years at Shell before joining British Gas, has continually shrugged off such talk.


Other contenders for First Calgary are Spanish oil firm Repsol and Italian rival ENI with outside interest from Indian state-owned energy firm ONGC, the Japanese and the Chinese, including CNPC.


The auction for the Canadian firm is one of the most eagerly-awaited sales of the year. It has discovered 13.5 trillion cubic feet of gas in Algeria alongside 1bn barrels of liquids - oil and condensate.


An insider said: 'There are companies who are already exposed to Algeria that want to farm-in and take a percentage in the company, to get more throughput on their pipelines. Then there are other companies, such as BG, who are looking more strategically.'


First Calgary's shares have fallen nearly 30% since February - from 1062½p to 756p - amid growing doubts over the quality of the reservoir in Algeria, worries over the level of support for project development from state-firm Sonotrach and the lack of available export capacity.


But several big hitters in the industry are interested, given Algeria's proximity to the lucrative Western Europe market. Britain is expected to become a net importer of gas later this year.


Supporters claim the knocking has come from firms hoping to get First Calgary's asking price down before the deadline for the first indicative offers, the weekend of 16-17 April.


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