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UPDATE 2-BG Group cuts output forecasts, hit by turmoil in Egypt

* Cuts production forecasts for 2014, 2015

* 2013 earnings hit by big impairment charge

* Issues force majeure notices for Egyptian LNG project

* Shares drop as much as 15 percent

(Adds analyst, shares, detail, background)

LONDON, Jan 27 (Reuters) - Oil and gas firm BG Group issued a profit warning and cut its production forecasts for this year and next, blaming turmoil in Egypt and sending its shares down as much as 15 percent.

The British group, which counts on Egypt for about a fifth of its production, said on Monday the government there had not honoured agreements covering BG's share of gas from fields, with high levels of gas being diverted to the domestic market.

This had prevented it from meeting its export obligations for an Egyptian liquefied natural gas (LNG) project. As a result, BG said it had served so-called "force majeure" notices to affected buyers and lenders, effectively freeing all sides from contract terms due to circumstances beyond their control.

"It's a blood bath," said Santander analyst Jason Kenney. "I think we're looking at a 15 percent cut in earnings (forecasts) for 2015."

BG said it expected to produce between 590,000 and 630,000 of barrels of oil equivalent per day (boed) this year, as much as 12 percent lower than currently expected by analysts and as much as 7 percent below its 2013 production.

The group also cut its 2015 guidance to between 710,000 and 750,000 boed, from a target of 775,000-825,000 boed given in May.

For 2013, BG said earnings would fall 33 percent to around $2.2 billion due to a $2.4 billion non-cash, post-tax impairment charge to reflect the difficult operating environment in Egypt, as well as lower future gas prices in the United States.

"Despite the good progress we have made in 2013 we face short-term issues which are reflected in our revised 2014 guidance. This is very disappointing," Chief Executive Chris Finlayson said.

The downgrades are the latest in a series of disappointing updates from BG. Over the past 18 months, it has cut its output forecasts three times, including abandoning a goal to produce 1 million boed by 2015.

But the group is not the only oil company struggling to grow. Larger rival Shell earlier this month issued a profit warning.

Egypt has undergone a prolonged period of political and civil unrest since the toppling of long-running president Hosni Mubarak in 2011.

BG said negotiations with the Egyptian authorities were ongoing, adding it remained committed to the Egyptian LNG project, although there was uncertainty over the number of LNG cargoes that project would produce in 2014.

BG is due to report its fourth quarter and full-year results on Feb 4.

(Editing by Kate Holton and Mark Potter)

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