BP, CNPC Sign 2nd Shale Gas Deal

BP has signed a second production-sharing contract (PSC) for shale gas exploration, development and production with China National Petroleum Corporation (CNPC), the UK major said September 1.

Signed on July 27, the PSC covers some 1,000 km² at Rong Chang Bei in the Sichuan Basin. In March 2016, BP and CNPC signed their first shale gas PSC on the adjoining Neijiang-Dazu block. As with the earlier contract, CNPC will operate the Rong Chang Bei PSC.

BP CEO Bob Dudley said: “Combining CNPC’s operational expertise with BP’s technology and experience, we now expect to leverage the synergies between these blocks. This new PSC clearly demonstrates our continued commitment to invest in projects in China which will deliver long-term value to BP, to our Chinese partners and, most importantly, to the country.”

BP CEO Bob Dudley and his CNPC counterpart Wang Yilin at the signing of the first shale gas PSC on March 31 2016 (Photo credit: CNPC)

BP and CNPC signed their framework agreement on strategic cooperation in October 2015 when the Chinese president, Xi Jinping, visited the UK. In addition to unconventional resources, that agreement covers possible future fuel retailing ventures in China, potential new oil and LNG trading opportunities globally and carbon trading, as well as sharing low carbon energy knowledge.

CNPC chairman Wang Yilin said that the two unconventional resource PSCs signed this year are a “manifestation of our deepening cooperation.”

BP’s 2016 Energy Outlook forecast that, by 2035, shale gas would account for one-quarter of world gas production and China will become the world’s largest contributor to shale gas production growth. "China is important for global energy markets and for all BP’s businesses. With this new PSC sealed, we want to further expand our presence in this vital market," said Edward Yang, BP China President.  

Mark Smedley