BP and CNPC sign shale gas production sharing contract

London-listed oil giant BP and China National Petroleum Corporation (CNPC) have signed a production sharing contract (PSC) for shale gas exploration, development and production in the Neijiang-Dazu block in the Sichuan Basin, China.

The contract, which covers approximately 1,500 square kilometres, is the first of its kind for BP in China.

BP’s chief executive Bob Dudley said: “We are pleased to reach this significant milestone as part of our strategic partnership with CNPC, building on our successful cooperation in and outside of China.

“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 from the framework agreement on strategic cooperation signed by BP and CNPC last October during the UK visit of President of The People’s Republic of China, Mr. Xi Jinping.

The framework agreement also covers possible future fuel retailing ventures in China, exploration of oil and liquefied natural gas trading opportunities, carbon emissions trading and the sharing of knowledge around low carbon energy and management practices.

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 realise the efficient development of unconventional resources.”

According to BP’s 2016 Energy Outlook, shale gas will account for a quarter of the total gas produced globally by 2035 and China will become the world’s largest contributor to growth in shale gas production.

At 1240 BST, BP shares were down 0.5% to 353.90p.