BG Group’s Egyptian subsidiary announced it would invest $2 billion to install a pipeline and drill new wells off Egypt’s Mediterranean coast to help meet the country’s growing demand for gas.

BG Egypt, the country’s largest natural gas producer, said on Tuesday it expected the new offshore pipeline, its third in the West Delta concession, to be operational by the end of this year and would enable the firm to maintain its current production levels.

The firm will also drill nine wells in West Delta, which will be operational by late 2011, BG Egypt President Arshad Sufi said.

“Gas demand in Egypt is going up, and increased demand helps promote exploration,” Sufi told reporters.

BG Group was one of six firms that won offshore oil and gas blocks in the Mediterranean in February.

Egypt’s proven natural gas reserves were 77.2 trillion cubic feet in its 2008/09 fiscal year, according to the oil ministry.

BG Egypt says its production accounts for 35 to 40 percent of the country’s gas output, which the ministry said was 2.33 trillion cubic feet in 2008/09. Just over 37 percent of Egypt’s total production is exported.

“Egypt is a core area for us … and we will continue to look at new blocks,” Sufi said.

Egypt exports natural gas by pipelines and also ships liquefied natural gas (LNG) abroad.

The most populous Arab country said in 2008 it would not sign any new gas export contracts until the end of 2010 because of rising domestic demand.

Egypt has said it expected 36 exploratory and development wells for natural gas to be drilled in 2010.