Annual Financial Report

BG GROUP PLC PUBLICATION OF DOCUMENTS: 2010 ANNUAL REPORT AND ACCOUNTS AND NOTICE OF ANNUAL GENERAL MEETING ON 12 MAY 2011

The following document has today been posted or otherwise made available to shareholders:

- Annual Report and Accounts for the year ended 31 December 2010

The above document incorporates the Notice of Annual General Meeting to be held on 12 May 2011.

In accordance with Listing Rule 9.6.1, BG Group plc (the "Company") has today submitted a copy of the document to the UK Listing Authority via the National Storage Mechanism and this document will shortly be available for inspection at www.Hemscott.com/nsm.do

The Annual Report and Accounts for the year ended 31 December 2010 are attached to this announcement as a PDF file and are also available on the BG Group website at www.bg-group.com/reports :

http://www.rns-pdf.londonstockexchange.com/rns/9005D_-2011-3-30.pdf

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IMPORTANT: EXPLANATORY NOTE AND WARNING

The primary purpose of this announcement is to inform the market about the publication of BG Group plc's Annual Report and Accounts for the year ended 31 December 2010 (the "2010 Annual Report and Accounts").

The information below, which is extracted from the 2010 Annual Report and Accounts, is included solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with BG Group plc's Fourth Quarter and Full Year Results Announcement issued on 8 February 2011. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2010 Annual Report and Accounts. Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2010 Annual Report and Accounts.

ADDITIONAL INFORMATION REQUIRED BY DISCLOSURE AND TRANSPARENCY RULE 6.3.5

Statement of Directors' Responsibilities for Preparing the Financial Statements

The following statement which was prepared for the purposes of the 2010 Annual Report and Accounts is set out on page 75 of that document. As set out above, this statement is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from the 2010 Annual Report and Accounts. It is not connected to the extracted and summarised information presented in this announcement and in BG Group plc's Fourth Quarter and Full Year Results Announcement that was published on 8 February 2011.

"Pursuant to Rule 4.1.12 of the Disclosure and Transparency Rules, each of the Directors, the names and functions of whom are set out on pages 46 to 47, confirms that to the best of his or her knowledge:

·; the Group Financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·; the management report represented by the Directors' report on pages 2 to 75 includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that the Group faces.

By Order of the Board

Frank Chapman

 Chief Executive

Ashley Almanza

 Chief Financial Officer

11 March 2011"

Related Party Transactions

 The following description of related party transactions is set out on page 124 of the 2010 Annual Report and Accounts. As set out above, this description is repeated here solely for the purpose of complying with DTR 6.3.5.

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

As at 31 December 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, BG Group provides financing to some of these parties by way of loans. As at 31 December 2010, loans of $1 294m (2009 $1 502m) were due from joint ventures and associates. These loans are accounted for as part of BG Group's 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 BG Group with a financing arrangement during the year. As at 31 December 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%).

BG Group has a finance lease arrangement with a joint venture company. As at 31 December 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 of BG Group plc. Peter Backhouse is regarded as interested in the contract of employment by virtue of his relationship with William Backhouse. The terms and conditions of William Backhouse's employment are consistent with others employed in a similar role.

As at 31 December 2010, a debtor balance of $3 883m (2009 $4 612m) (see note 16, page 110) and a creditor balance of $66m (2009 $78m) (see note 21, page 120) were outstanding between BG Group plc and other Group undertakings. In 2010, BG Group plc received dividends of $nil (2009 $3 294m) from BG Energy Holdings Limited, its subsidiary undertaking. BG Group 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).

Principal Risks and Uncertainties

The following description of principal risks and uncertainties is set out on pages 34 to 39 of the 2010 Annual Report and Accounts. As set out above, this description is repeated here solely for the purpose of complying with DTR 6.3.5.

BG Group's businesses around the world are exposed to a number of risks and uncertainties, each of which could potentially have a material adverse effect on the Group's strategy, business, performance, results, financial or trading condition and/or reputation. In turn, these may impact shareholder returns, including dividends, and/or BG Group's share price.

Important notes

·; The summary of principal risks and uncertainties, set out on the following pages, is not presented in order of potential magnitude, materiality or probability of occurrence.

·; Not all of these risks and uncertainties are within BG Group's control.

·; Some of the major risks involved in BG Group activities cannot, or may not, reasonably and economically be insured.

·; While the Group has developed processes for identifying and managing risk, it is not possible to be certain that those processes will be successful in fully mitigating all relevant risks. These processes provide reasonable, rather than absolute, assurance and are designed to manage, rather than eliminate, risk.

·; The Group may also be affected adversely by other risks and uncertainties besides the principal risks and uncertainties listed here.

Shareholders should consider the principal risks and uncertainties described in this section in conjunction with the legal notice set out on page 146.

Evolving risk profile

BG Group's risk profile continually evolves over time as a result of changes in both the external environment and the continued growth and development of the Group's portfolio. For example, while BG Group's move into unconventional resources in the USA (shale gas) and Australia (coal seam gas) provides the Group with significant growth opportunities and reduces the Group's overall exposure to non-OECD countries, it also brings new risks and uncertainties that need to be managed. The main external and internal events that have either shaped BG Group's risk profile or been the focus of Board and management attention since the date of the last report are discussed in more detail below. The principal risks and uncertainties currently facing the Group, and the steps management has taken to mitigate and manage them, are set out on pages 35 to 39.

World economy

As discussed in the Chairman's statement on page 9, economic conditions remain challenging for many OECD countries, including the USA. Although certain regions are demonstrating a return to economic growth, with emerging economies in Asia and South America showing strong momentum, there remains the risk that continued economic weakness or a return to economic uncertainty adversely impacts the demand for gas and oil which in turn could have an adverse impact on BG Group's business. BG Group's operations in North Africa have not been materially affected by political events in that region to date, although the Group will continue to monitor developments carefully.

Safety and asset integrity

The BP Macondo blow-out in the Gulf of Mexico was a stark reminder that, in the oil and gas industry, there is an inherent potential for loss of life, environmental damage, and a consequential erosion of shareholder value from a single catastrophic event. It also brought into sharp focus the issue of how operators manage and communicate with their contractors and joint venture partners. A failure to build, operate, maintain and decommission facilities in a safe manner in any environment could result in loss of life, production and revenues, cause significant damage to reputation or the environment and, ultimately, lead to an erosion of shareholder value. BG Group therefore continues to focus on managing safety and asset integrity risks as a priority for the Board and Group Executive Committee (GEC). In particular, the Group is focused on contractor management and seeks to ensure that its contractors and joint venture partners adopt a safety culture and comply with safety standards that are at least equivalent to those applied by BG Group to its own operations.

In response to the BP Macondo blow-out, BG Group has established the Group Well Risk Management Team (GWRMT) comprising experts from all relevant disciplines to ensure lessons learned from the incident are applied appropriately to its business. The response of regulators to the BP Macondo blow-out is also being closely monitored. BG Group is involved with relevant industry bodies and intends to play its part in shaping the response of the industry as a whole.

Project delivery

The Group's growth plans for the next decade are increasingly dependent on the successful development and operation of its existing projects, in particular its unconventional gas plays in Australia and the USA, and the Group's interests in the deep-water oilfields in the Santos Basin, offshore Brazil. Each of these projects is inherently complex and their successful development remains a significant challenge for the Group. As a result, the Board and GEC receive regular updates on the management of these projects and are focused on ensuring that risks are mitigated and managed as far as possible.

Kazakhstan

BG Group and its partners within the Karachaganak Petroleum Operating B.V. ("KPO") are in discussions with the government of the Republic of Kazakhstan to resolve a number of matters related to taxation and cost recovery. It is not possible at this point to ascertain the potential impact on BG Group's interests of the outcome from those ongoing discussions.

However, BG Group remains optimistic that those matters can be resolved to the satisfaction of all parties. See note 25(E) on page 123 in relation to legal proceedings.

Capital expenditure

Given the scale of BG Group's investment over the coming years - a period in which projects in Australia, Brazil and the USA will require significant capital expenditure - the Board and GEC also remain focused on ensuring that the Group remains soundly financed. For further details of the Group's financial outlook, see the Financial review on pages 27 to 33.

Asset integrity, safety, health and security

 Oil and gas exploration and production activities carry significant inherent risks, especially deep-water drilling and operations in high pressure/high temperature wells. Major accidents or incidents and/or the failure to manage these risks could result in injury or loss of life, damage to the environment, and/or loss of certain facilities, with an associated loss or deferment of exploration, production and revenues, as well as costs associated with mitigation, recovery and compensation.

 BG Group is also subject to health and safety laws in numerous jurisdictions around the world. Failure to comply with such laws could significantly impact the Group's reputation, which could have a subsequent effect upon the willingness of stakeholders to work with the Group.

Any new laws and regulations may result in BG Group having to curtail or cease certain operations or implement temporary shutdowns of facilities, which could diminish its productivity and materially and adversely impact the results of operations, including the Group's profits.

BG Group also faces security threats. Acts of terrorism or civil unrest which may affect BG Group's plants and offices, pipelines, transportation or computer systems could severely disrupt its business and could cause harm to people.

Information technology security breaches may also result in the loss of BG Group's commercially sensitive data.

Commentary

Asset integrity and safety are overriding priorities for BG Group. The Group designs and operates management systems and tools to help it manage risks in these areas. The Group's mandatory health, safety, security and environment (HSSE) and asset integrity Standards are regularly reviewed to ensure they are in line with industry best practice and are embedded in the organisation through extensive training backed up by regular audits and assessments. Contractor management is recognised as an essential part of good safety management, and the Group seeks to ensure that its worldwide contractor community understands and applies the Group's safety culture and processes to their own operations. To reduce to as low as practicable the risk of asset failure, it is mandatory for every operated asset to have Safety Cases in place which identify and describe the hazards associated with that asset and to have measures in place to manage those hazards.

Capital requirements, liquidity and interest rates

BG Group has substantial capital expenditure requirements in its business and operations. The Group's capital requirements depend on a broad range of factors (including, for example, commodity prices, currency exchange rates, acquisitions and proceeds realised from disposals), some of which are outside the Group's control, and may cause capital requirements to vary materially from planned levels. Increases in BG Group's capital requirements could adversely affect the Group's business and financial performance, and BG Group's ability to access finance on attractive terms may be limited. A credit crisis affecting banks, financial markets and/or the economy more generally could affect the Group's ability to raise capital.

BG Group is also exposed to liquidity risks, including risks associated with refinancing borrowings as they mature and the risk that financial assets cannot readily be converted to cash without loss of value.

BG Group's financing costs may be significantly affected by interest rate volatility.

Commentary

BG Group policy requires a specified minimum amount of committed borrowing facilities as back-up liquidity to fund operating and capital requirements. In 2010, the Group's committed facilities, which are held with a number of major international banks, were increased to $3.5 billion and the expiry dates extended. Those facilities were undrawn as at 31 December 2010.

The Group holds its financial assets primarily in short-term, highly liquid investments that are readily convertible to cash.

The Group imposes limits on the amount of borrowings that mature within any specific period. BG Group's interest rate management policy requires that borrowings are substantially floating rate. Exceptions from this policy require approval from the Group's Finance Committee.

Climate Change

Policies and initiatives at national and international level to address climate change are likely to affect business conditions and demand for various energy sources in the medium to long term. Worldwide policy and regulatory actions are driving targeted reductions in greenhouse gas (GHG) emissions which will in turn influence the future of the global energy industry. Policy approaches that promote the use of alternative energy sources (such as renewable and nuclear power) may affect BG Group's ability to maintain its position in key markets. Additionally, new regulatory regimes intended to establish emissions trading schemes could alter hydrocarbon production economics.

Commentary

Public policy responses to climate change continue to evolve, and BG Group closely monitors developments in this area. The Group's strategy is shaped by its belief that the energy industry will necessarily play a role in the solution to climate change and that natural gas has a recognised contribution to make. Many governments are seeking increased natural gas utilisation as a lower-carbon alternative to coal or oil within the context of their broader climate change mitigation strategies. BG Group actively identifies projects to minimise GHG emissions across its existing operations and in new developments, including applying best available techniques to help meet its target of a one million tonne reduction in emissions (compared with a no-action base case) between 2007 and 2012. BG Group also participates in applicable carbon-emissions trading schemes.

Commodity Prices

BG Group's cash flows and profitability are sensitive to commodity prices for natural gas, crude oil, liquefied natural gas (LNG) and other hydrocarbons. The Group's exposure to commodity prices varies according to a number of factors, including the mix of production and sales. While industry costs tend to rise or fall with commodity prices in the long term, there is no guarantee that movements in sales prices and costs would align in any year. This can put pressure on investment and project economics which depend in part upon the degree and timing of commitments in line with particular cost structures.

BG Group does not as a matter of course hedge all commodity prices, but may hedge certain LNG contracts and other revenue streams from time to time. In marketing its energy portfolio, BG Group undertakes commodity hedging and trading activities, including the use of futures contracts, financial and physical, forward-based contracts and swap contracts. The stand-alone value of hedges can move significantly, potentially increasing the volatility of cash required for margin calls and the accounting profit recognised within a particular quarter.

Demand for LNG, both domestic and international, is dependent upon a number of macro-economic factors, and LNG prices can vary significantly depending upon the supply and demand balance in a market.

Commentary

BG Group estimates that, other factors being constant, a $1 per barrel rise (or fall) in oil prices would increase (or decrease) operating profit in the Group's Exploration and Production (E&P) business in 2011 by approximately $70 million to $100 million.

BG Group's sensitivity to oil prices is set to increase due to the contribution from significant oil-related revenues, notably from Brazil, and from oil-indexed LNG sales. However, the Group's portfolio also includes a range of long-term gas contracts that are not directly or immediately linked to short-term changes in commodity prices. Additionally, some LNG purchase contracts contain provisions under which the gas suppliers share price risk with BG Group.

Projects and investments are screened against a wide range of external sensitivities, including benchmark commodity prices.

Credit

The challenging credit environment witnessed during the past three years has highlighted the importance of managing credit risk. BG Group's exposure to credit risk takes the form of a loss that would be recognised if counterparties (including sovereign entities) failed, or were unable, to meet their payment or performance obligations. These risks may arise in all forms of commercial agreements and in certain agreements relating to amounts owed for physical product sales, the use of derivative instruments, and the investment of surplus cash balances. The Group is also exposed to political and economic risk events that exacerbate country risk and which may cause non-payment of foreign currency obligations to BG Group by governments or government-owned entities, or which may otherwise impact successful project delivery and implementation. The impact of credit issues could also lead to the failure of companies in the sector, potentially including partners, contractors and suppliers.

Commentary

Credit exposure risk is monitored centrally for individual transactions including concentration risk and the appropriateness of limits. BG Group considers the financial and credit condition of counterparties (including sovereign entities) prior to entering into commercial contracts, trading sales agreements, swaps, futures and options contracts. BG Group may also seek contractual or other forms of protection or mitigation, including cash collateral, letters of credit, security over assets or parent company guarantees. Where multiple transactions are undertaken with a single counterparty or group of related counterparties, the Group may enter into a netting arrangement. For physical commodity trading, the Group seeks to put in place bespoke master netting agreements or standard arrangements appropriate to the local market.

Delivery of projects

Delivery of projects (including in the pre-sanction phase) may be subject to: sub-surface uncertainties; cost and time overruns; HSSE risks; technical (mechanical and engineering), commercial, legal or regulatory compliance failures; equipment shortages; insufficient availability or capability of employees or contractors; unscheduled outages; stakeholder risks; a deterioration of macroeconomic conditions; and gas pipeline system constraints. Drilling, completing or operating wells is often uncertain and may be subject to delays, curtailment or cancellation due to a variety of factors including: unexpected drilling conditions; pressure or irregularities in geological formations; equipment failures or accidents; adverse weather conditions; and compliance with governmental or regulatory requirements. Those events could result in a failure to deliver sanctioned projects in line with final investment decisions.

Failure to select the most suitable development concept based on a full-lifecycle understanding of the project can expose projects to additional cost and risks, and may contribute to lower than estimated production in future.

In many cases, the cause of delay or cost over-run in project implementation can be the misalignment of partner objectives. BG Group has a number of partner-operated joint ventures in which it participates. The Group's ability to influence the operations of those joint ventures may be limited. The Group faces the risk that actions or omissions on the part of the operators of those joint ventures expose the Group to reputational or legal risk, as well as liabilities.

Political factors can often be a significant risk to project delivery. Unconventional gas, operating in deep-water carbonate reservoirs, and the inherent complexity of some projects given their scale and the number and range of stakeholders, all present further challenges to successful project delivery.

Commentary

Project delivery is subject to BG Group's internal assurance processes to optimise designs and minimise risk. Due diligence prior to the final investment decision includes: scrutiny of feasibility studies; concept selection and definition; project planning; commercialisation options; and project economics. Projects are screened against a wide range of external sensitivities, including commodity prices and input costs.

BG Group has an ongoing programme focused on ensuring optimal project management, clear accountabilities for delivery and the best possible deployment of project management capability across the portfolio. Performance is assured against Group-wide mandatory technical Standards and strict capital and cost discipline is applied to protect value. The Group seeks to ensure that effective stakeholder alignment enables an adequate degree of control during project construction and operation.

Environment

BG Group's activities may affect the environment. The potential environmental consequences of the Group's activities include the impact of wells, pipelines and other infrastructure on onshore or marine ecological habitats, with a resulting effect on biodiversity. Measures undertaken to tackle loss of biodiversity, together with policies intended to protect local habitats, may limit access to gas and oil in areas deemed to be biologically sensitive.

Following BG Group's investments in the USA and Australia, water-related issues are more prominent for the Group. In particular, the Group is required to manage numerous issues related to both the disposal of water produced from coal seam gas production and securing and disposing of water related to the fracing process required in the extraction of shale gas. Further details are set out in The way we work on pages 40 to 43. There is a risk that the Group may not satisfactorily resolve these water management issues and/or may be subject to new laws or regulations in this area, which may adversely affect the successful delivery of those projects.

Other potential environmental consequences of BG Group's operations include, for example, the release of hydrocarbons or chemicals onto land or into water; noise pollution; the visual impact of gas and oil infrastructure; and the emission of pollutants that affect air quality.

Commentary

BG Group is focused on developing processes to minimise the impact of its operations on local environments and habitats. The Group's Environmental Management System is designed to go beyond compliance with local regulation to meet internationally accepted best practice. During 2010, BG Group appointed Halcrow Group Limited, a major international water consultancy, to conduct a review of water-related risks and operational requirements across the Group's portfolio. The results from that review will inform further developments of the Group's strategic approach to water efficiency and water risk management.

Exchange Rates

The Group reports its financial results in US Dollars. Although a large percentage of the Group's business activity is conducted in US Dollars, a significant portion of the Group's operating cashflows, capital expenditure, operating expenses and income taxes accrue in (and asset and liability positions are held in) other currencies, including the Australian Dollar, Brazilian Real and Pound Sterling. Consequently, the Group's results and financial position may be significantly affected by exchange rate fluctuations.

Commentary

BG Group mitigates its exposure to net asset positions in certain currencies other than the US Dollar (primarily, the Brazilian Real and Pound Sterling) by denominating a portion of its after-swap borrowings in such currencies, with the balance of after-swap borrowings denominated in US Dollars. The Group hedges certain expected cash flows into US Dollars. Currency hedging is also undertaken to mitigate currency exposure in certain cross-border transactions.

Insurance

Risks associated with the energy industry include: exposure to personal injury and loss of life; asset failures; loss of containment of hydrocarbons; environmental issues; and natural disasters, together with associated consequential losses, any of which may have an adverse effect on business performance. The transfer of risks to the insurance market may be affected and influenced by constraints on the availability of cover, market appetite and capacity, pricing and the decisions of regulatory authorities. Some of the major risks associated with BG Group's activities cannot or may not be reasonably or economically insured. BG Group may incur significant losses from different types of risks that are not covered by insurance.

Commentary

BG Group maintains an insurance programme to provide some mitigation against significant losses, which, as is consistent with general industry practice, includes certain limited cover for physical damage, removal of debris, control of wells, re-drill, sudden and accidental pollution, and employer's and third-party liabilities. The insurance programme incorporates a captive insurance vehicle. Policies purchased are subject to certain limits, deductibles and specific terms and conditions. In addition, insurance premium costs are subject to changes based on a company's loss experience, the overall loss experience of the insurance markets accessed, and capacity constraints.

Operational Performance

BG Group's production volumes (and therefore revenues) are dependent on the continued operational performance of its producing assets. The Group's producing assets are subject to a number of operational risks including: reduced availability of those assets due to planned activities such as maintenance or shutdowns; unplanned outages which may, for example, be due to equipment or human failure; asset integrity and HSSE incidents; adverse reserves recovery; the performance of joint venture partners; the performance of the Group's contractors; and exposure to natural hazards, such as extreme weather events.

Each of these factors could adversely affect the Group's ability to deliver its operational business and financial performance.

Commentary

BG Group has mandatory Policies and Standards governing all aspects of its operations, including HSSE and asset integrity. These are supported by assurance processes which are supervised by the Group's technical functions and are applied globally. These Policies and Standards are designed to manage, rather than eliminate, the impact of those risks.

Organisational Capacity

BG Group's performance, operating results and future growth depend to a large extent on its continued ability to attract, retain, motivate and organise appropriately qualified personnel with the level of expertise and knowledge necessary to conduct BG Group's operations. Competition for talented, suitably experienced and qualified management and employees is intense for specialists in oil and gas.

Commentary

BG Group takes a systematic approach to resourcing to ensure it can meet its long-term human resource needs, operating short and long-term resourcing demand models to predict and manage the people requirements that underpin the Group's business plans. The Group aims to identify the best people through succession planning and talent management, coupled with effective recruitment.

Political context and stakeholder relationships

BG Group faces a range of political risks. For instance, governments may alter fiscal or other terms governing oil and gas industry operations, especially where they face financial pressures, or may act (or fail to act) in a way that delays project schedules or increases costs, thus eroding value. In addition, BG Group needs to work with governments and national oil companies in order to secure access to new resources and to ensure the successful monetisation of existing resources. In such cases, political considerations can influence decision making. In recent years, some governments and state-owned enterprises have exercised greater authority over, and imposed more stringent conditions on, companies pursuing exploration and production activities in host countries, thereby increasing the costs and uncertainties of business operations. This trend may continue. BG Group also faces increased risk if it does not recognise, and take account of, the interests of the communities in the areas where it operates, or if it operates in an unethical manner in its relationships with those communities. The Group's operations will only be sustainable and successful over the long-term if its local stakeholders see benefit from those operations and support the Group's presence.

Commentary

The commitments in BG Group's Business Principles form the basis of the Group's efforts to address these issues and are summarised in The way we work section on page 40 and in the Sustainability Report (available online at www.bg-group.com/sustainability).

BG Group seeks to ensure that governments and national oil companies see it as a partner of choice. The Group aims to understand its stakeholders' priorities and interests and seeks alignment with them wherever possible, while making it clear that contract sanctity and stability are essential to attract and underpin direct foreign investment. BG Group also endeavours to ensure that its portfolio is appropriately diversified as a mitigant against potential instability within specific countries or regions where the Group has an interest.

Regulation and Legislation

BG Group's business activities are conducted in many different countries and are therefore subject to a broad range of legislation and regulations. Any non-compliance by the Group with applicable laws and/or regulations could lead to legal or regulatory sanctions, as well as reputational damage. The need to comply with any new or revised laws or regulations (or new or changed interpretations or enforcement of existing laws or regulations) may have a material impact on the Group's business and financial position. Compliance with such laws and regulations may impose significant additional costs on the Group's business and could potentially limit its flexibility with respect to its business practices. In addition, in some countries, governments are facing greater pressure on public finances, leading to a risk of increased taxation.

If BG Group employees, or anyone working on its behalf, violate laws and regulations in jurisdictions in which the Group operates (including US or UK laws and regulations with extraterritorial application), the Group may face reputational damage and be subject to significant penalties, including fines or loss of operating licences.

Commentary

BG Group's Business Principles require the Group to comply with legal, regulatory and licence requirements in the countries in which it operates. The Group is committed to training its workforce to ensure compliance. BG Group expects to continue to incur capital and operating expenditure to comply with increasingly complex laws and regulations worldwide, particularly in relation to environmental protection and health and safety.

Resources discovery, estimation and development

Delivery of production growth depends upon a number of factors, including: successful discovery and development of hydrocarbon resources; the acquisition of sufficient new resource opportunities; sufficient field appraisal; reservoir quality and performance; accurate interpretation of received data; drilling conditions or costs; rig availability; and adequate human or technical resources. Competition for exploration and development rights, and access to gas and oil resources, is intense. A failure to secure appropriate new resources could impact upon the Group's production growth prospects beyond the next decade.

Gas and oil reserves and resources cannot be measured exactly since estimation of reserves and resources (for more information see page 132 of the Annual Report and Accounts) involves subjective judgements, may not align with the estimates of total reserves and resources of BG Group's joint venture partners (including operators), and may be subject to downward revision. Factors that may lead to such revisions include: a decline in the price of oil or gas which may make reserves and/or resources uneconomic to develop and therefore not classifiable under current reporting requirements; changes in gas and oil prices in fields subject to Production Sharing Contracts which may result in changes to entitlements, and therefore reserves; the quality and quantity of the Group's geological, technical and economic data may prove to be inaccurate; and the Group's ability to interpret that data appropriately may be limited. In addition, actual production performance from reservoirs may be lower than estimated. Changes in tax rules and other government regulations may also result in reserves or resources becoming uneconomic.

Commentary

BG Group operates a ranking process to select prospect resource inventory opportunities for exploration drilling. This process is overseen by the Exploration and Appraisal Committee which reviews these opportunities against a set of multiple risk criteria, including technical, commercial, economic and political factors, to assess their potential for development.

Changes to the Group's reserves or discovered resources figures are overseen by the Corporate Reserves Group (CRG). The CRG is responsible for performing independent reviews of all reserves and discovered resources estimates and supports the Reserves Committee, which reviews and endorses the Group's total resources estimates. The Reserves Committee reports annually to the Audit Committee on the adequacy of the Group's reserves and resources process. For further details of the Reserves Committee, please see the Governance report on page 56.

Legal Notice

This announcement contains forward-looking statements. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity, and must not be relied upon in any way in connection with any investment decision. The Company undertakes no obligation to update any forward-looking statements. The Company is subject to the regulatory requirements of the Financial Services Authority of the United Kingdom.