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BP Secures Another Shale Gas Contract With China's Largest Producer

BP plc has nabbed its second contract this year with China National Petroleum Corp. (CNPC) to explore, develop and produce shale natural gas in the Sichuan Basin.

The production sharing contract (PSC), signed in late July, covers about 1,000 square kilometers (621 square miles) at Rong Chang Bei. The PSC is the second between the partners after they signed a shale gas PSC in March to explore and produce in the Sichuan Basin's adjoining Neijiang-Dazu block (see Shale Daily, March 31). As with the first contract, CNPC would operate the Rong Chang Bei PSC.

"This second shale gas PSC in China builds on the successful cooperation we are already seeing with the Neijiang-Dazu PSC signed in March," BP Group 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."

The PSC is another brick between BP and China's largest state-owned producer regarding strategic cooperation in energy projects after they clinched an agreement last year (see Shale Daily, Oct. 21, 2015). In addition to unconventional resource exploration and development, the framework agreement from October 2015 covers possible future fuel retailing ventures in China, potential oil and liquefied natural gas trading and carbon emissions trading, as well as sharing knowledge around low carbon energy and management practices.

"CNPC and BP's existing cooperation covers various areas including upstream and 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, the two unconventional resource PSCs signed this year are manifestation of our deepening cooperation. By leveraging the parties' complementary advantages, CNPC and BP will jointly realize the efficient development of unconventional resources."

As the world's largest developing country, China is expected to play a vital role in transforming the global energy mix and to increase the proportion of gas in its overall primary energy consumption. As a new strategic focus for China, exploring, developing and producing shale gas is expected to benefit the country's energy mix in the long term.

BP's latest Energy Outlook, issued in February, forecast that by 2035, shale gas would account for one-quarter of the total gas produced globally, and China would become the world's largest contributor to growth in shale gas production (see Shale Daily, Feb. 10).

"China is important for global energy markets and for all BP's businesses," said BP China President Edward Yang. "With this new PSC sealed, we want to further expand our presence in this vital market. The two recently-signed shale gas PSCs not only underline BP's continued confidence in the Chinese market, but also reaffirm our dedication to support China in unlocking its potential for more sustainable energy development."

Royal Dutch Shell plc in 2012 secured the first-ever PSC with CNPC to develop shale gas resources, and Shell said four years ago it would invest at least $1 billion a year to develop China's unconventional and coalbed methane resources (see Shale Daily, Aug. 23, 2012; March 22, 2012). ConocoPhillips also in 2012 secured a PSC with China Petrochemical Corp. to study unconventional resources in the Sichuan Basin (see Shale Daily, Dec. 27, 2012).

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