* Profits down on lower gas and oil prices
* In line with expectations
* Will miss 2009 oil and gas output target
(Adds more details)
By Tom Bergin
LONDON, July 29 (Reuters) - British gas producer BG Group reported a 31 percent drop in second quarter net profit on Wednesday, as gas and oil prices fell sharply, and said lower gas demand meant it would not meet its 2009 production target.
BG made a second-quarter net profit of 513 million pounds ($842 million), down from 747 million pounds in the same period last year.
The weakness in the world economy is hitting demand for gas even harder than oil and this means BG will not be able to meet its 2009 production target of 680,000 barrels of oil equivalent per day (boepd), as some analysts had predicted.
Nonetheless, BG managed to lift production 7 percent in the quarter, compared with the same period in 2008, to 643,000 boepd thanks to new projects coming on line. BG enjoys one of the strongest production growth records in the industry.
Excluding one-off items and non-cash charges related to long term contracts which are treated as derivative for accounting purposes the result was 507 million pounds, in line with an average forecast of 510 million pounds from a Reuters poll of nine analysts.
BG said it was making progress on reducing costs -- a key theme for an industry which has seen costs double since 2004. Operating expenditure per barrel of oil equivalent produced fell 16 percent in the quarter compared with the same period in 2008.
Despite the global drop in gas prices, BG said the average price it received for its UK gas rose 3.4 pence to 36.2 pence per therm. ($1=.6092 pounds) (Editing by Greg Mahlich)