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BP, China's Top Producer to Develop Unconventional NatGas in Sichuan Basin

BP plc on Thursday secured its first unconventional natural gas exploration contract in China in an agreement with the country’s largest state-owned producer.

The production sharing contract (PSC) with China National Petroleum Corp. (CNPC) covers shale gas exploration, development and production in the Neijiang-Dazu block of the Sichuan Basin.

The PSC is a “significant milestone as part of our strategic partnership with CNPC, building on our successful cooperation in and outside of China,” BP CEO Bob Dudley said. BP plans to share with CNPC “technology, operational and subsurface techniques in unconventional resources.

“We will bring our worldwide experience to our first unconventional gas project in onshore China with CNPC. We will combine this with CNPC’s knowledge and experience to bring gas to China’s growing clean energy market. China continues to be an important part of BP’s portfolio.”

The contract is the first achievement by the partners following a framework on strategic cooperation that was signed last October (see Daily GPIOct. 21, 2015). In addition to unconventional resources, the agreement covers possible future fuel retailing ventures in China, global oil exploration, liquefied natural gas (LNG) trading opportunities and carbon emissions trading. The companies also agreed to share knowledge of low-carbon energy and management practices.

“CNPC and BP's existing cooperation covers various areas including retail business in China, overseas upstream exploration and development and international trading,” CNPC Chairman Wang Yilin said. “Building upon the framework agreement on strategic cooperation signed last year, this unconventional resource PSC is a manifestation of our deepening cooperation. By leveraging the parties' complementary advantages, CNPC and BP will jointly realize the efficient development of unconventional resources.”

CNPC four years ago inked a similar PSC with a unit of Royal Dutch Shell plc to explore for shale gas, also in the Sichuan, on the Fushun-Yongchuan Block (see Shale DailyMarch 22, 2012). ConocoPhillips also in 2012 agreed to work with state-owned China Petrochemical Corp., also known as Sinopec Group, to study unconventional resources in the Sichuan (see Shale DailyDec. 12, 2012). In addition, ConocoPhillips has agreements with state-owned PetroChina Co. Ltd. to analyze Sichuan prospects (see Shale DailyFeb. 21, 2013).

The 2016 edition of the BP Energy Outlook to 2035, the supermajor’s annual compendium that forecasts worldwide fossil and renewable fuel supply/demand trends, is expecting that by 2035 shale gas will account for 25% of the total gas produced globally, and China will become the world’s largest contributor to growth in shale gas production (see Shale DailyFeb. 10).

“As a new strategic industry for China, the exploration, development and production of shale gas will significantly benefit China’s energy mix in a long run,” BP China President Edward Yang said. “Through this PSC, BP once again clearly reaffirms our commitment to being one of China’s preferred energy partners to support the country in developing cleaner energy for a greener future.”

BP is one of the leading foreign investors in the Chinese oil and gas sector with activities that include exploration and development, petrochemicals manufacturing/marketing, aviation fuel supply, oil products retailing, lubricants, oil/gas supply and trading, LNG terminal/trunk line and the chemicals technology licensing.

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