* Production this year to be as much as 11 pct below f'casts
* Also cuts 2015 production forecast as much as 14 pct
* Costs per unit to rise due to project investments
* Project off UK coast to ramp up more slowly than expected
* Shares drop as much as 15 pct to lowest in nine months (Rewrites first paragraph, adds CEO and investor comments,background)
By Sarah Young and Chris Vellacott
LONDON, Jan 27 (Reuters) - Oil and gas firm BG Group warned that turmoil in Egypt would hit its output this year andnext, weighing on future earnings and sending its sharesplunging 15 percent.
BG said in a surprise statement on Monday production thisyear would be as much as 11 percent lower than analysts wereexpecting, and potentially 7 percent behind 2013 output. It alsocut its 2015 production forecast by as much as 14 percent.
"It's a blood bath," said Santander analyst Jason Kenney. "Ithink we're looking at a 15 percent cut in earnings (forecasts)for 2015."
The group is not the only energy company struggling to grow.Larger rival Shell earlier this month issued a profitwarning, while Chevron Corp, the second-largest U.S. oilcompany, has also warned it will likely miss forecasts.
BG also warned costs per unit will rise due to investment innew projects in Australia and Brazil, while a project off theBritish coast would ramp up more slowly than expected and itsentitlement to output in Trinidad and Tobago would decline.
The developments add up to the latest in a series ofdisappointments from BG and heap pressure on a mostly newmanagement team. Chief Executive Chris Finlayson took over ayear ago and Financial Director Simon Lowth joined in December.
"If it was just Egypt, I wouldn't worry. They haven't reallydelivered anywhere else. That's the problem," a top 40 investorin BG told Reuters.
"These guys seem permanently over-optimistic," the investorsaid. "We thought the new chief executive would be prudent inwhat he said and he has been found wanting a bit. That can beonly described as disappointing."
FORECASTS CUT
Over the past 18 months, BG has cut its output forecaststhree times, including abandoning a goal to produce 1 millionboed (barrels of oil equivalent per day) by 2015, and will haveposted two straight years of falling production before outputgrowth is restored in 2015.
BG's woes in Egypt will have effects across its business,impacting the profitability of its LNG unit and increasing itscosts per unit of production by around a third this year.
BG, which counts on Egypt for about a fifth of itsproduction, said the government there had not honouredagreements covering BG's share of gas from fields, with highlevels of gas being diverted to the domestic market.
This had prevented BG from meeting export obligations for anEgyptian liquefied natural gas (LNG) project and as a result ithad served so-called "force majeure" notices to affected buyersand lenders, effectively freeing all sides from contract termsdue to circumstances beyond their control.
For 2013, BG said earnings would fall 33 percent to around$2.2 billion due to a $2.4 billion post-tax impairment charge toreflect the difficult operating environment in Egypt, as well aslower future gas prices in the United States.
Excluding impairment charges, BG said 2013 earnings wouldcome in at around $4.4 billion, ahead of a company-suppliedanalyst forecast of $4.2 billion. It is due to reportfourth-quarter and full-year results on Feb. 4.
"Despite the good progress we have made in 2013 we faceshort-term issues which are reflected in our revised 2014guidance. This is very disappointing," Finlayson said.
BG shares were down 14.8 percent at 1,069.8 pence by 1202GMT, having fallen to a nine-month low of 1,050.05p.
PORTFOLIO CHANGES
The company reassured on the progress of its projects inAustralia and Brazil, which should will help lift output from2015, and Finlayson denied the downgrades to its medium-termoutlook would force BG to speed up potential divestments.
Analysts have long said BG could look to sell stakes in itsBrazilian and Australian assets to raise funds, and last May ina strategy update, the company's first under Finlayson, heconfirmed BG would look to actively manage its portfolio.
"We have a number of potential portfolio changes currentlyunder investigation ... but I'm not going to talk about themindividually and we are definitely not pushed by today'sannouncement into having to consider anything either faster orbroader than what we were considering anyway," Finlayson said.
BG said U.S. production would fall by around 25 percent in2014, the same drop as last year, as prices for gas there madeit uneconomic to produce as much from its shale resources.
Egypt, BG's largest single-country asset by production whichaccounted for 18 percent of output in 2013, has undergone aprolonged period of political and civil unrest since thetoppling of long-running president Hosni Mubarak in 2011.
Last year Egypt struck a deal with BG to cap and graduallyreduce diversions of gas to the domestic market, but anunexpectedly cold winter in Egypt and demand from the country'sindustrial sector raised domestic demand for gas and forced thegovernment to divert more gas away from the LNG plant.
Another LNG plant in Egypt, Damietta, jointly owned bySpain's Gas Natural and Italy's Eni, has beenidle since last year after also being affected by diversions ofgas to Egypt's domestic market.
Like most big oil companies, BG is also facing pressure tohold down spending as costs rise and prospects for oil priceswane. But it said lower than expected production this year,combined with increasing production from fields in Brazil andBolivia where royalty payments are due, mean its unit costswould jump in 2014.
Unit operating expenditure this year is expected to be inthe range of $15.50 to $16.25 per barrel of oil equivalent,between 27 and 34 percent higher than in 2013. (Additional reporting by Oleg Vukmanovic and Maggie Fick;Editing by Mark Potter and David Holmes)
