BG Group, the UK-based energy exploration and procurement business, has revealed that has significantly increased its fourth quarter production. Meanwhile the company's results have also indicated the inflated nature of North Sea gas prices as the UK wholesale market battles to reconcile supply constraints with surging demand.

In a trading update covering company performance for the months of October and November 2005, BG, part of the former state monolith British Gas, confirmed the rise in production to an aggregate of approximately 35 million barrels of oil equivalent (mmboe).

The oil and gas producer also revealed that the average realized prices during the period were $59 per barrel for oil, 36 pence per therm for UK gas and 21 pence per therm for international gas.

However, the declared gas prices show that UK gas earns BG a 70% premium over the gas it extracts in the rest of the world. This lucrative situation arises as the UK’s wholesale gas market struggles to deal with a severe lack of import capacity, coupled with fears that an exceptionally cold winter will push up demand, which has driven up wholesale prices in the UK.

This situation is only likely to be eased when new LNG import infrastructure comes onstream in 2007.