• 2 hours EIA Weekly Inventory Data Due Wednesday, Despite Govt. Shutdown
  • 6 hours Oklahoma Rig Explodes, Leaving Five Missing
  • 8 hours Lloyd’s Sees No Room For Coal In New Investment Strategy
  • 11 hours Gunmen Kidnap Nigerian Oil Workers In Oil-Rich Delta Area
  • 13 hours Libya’s NOC Restarts Oil Fields
  • 14 hours US Orion To Develop Gas Field In Iraq
  • 3 days U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 3 days Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 3 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 3 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 3 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 4 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 4 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 4 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 4 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 4 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 4 days Venezuelan Output Drops To 28-Year Low In 2017
  • 4 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 5 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 5 days Kinder Morgan Delays Trans Mountain Launch Again
  • 5 days Shell Inks Another Solar Deal
  • 5 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 5 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 5 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 5 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 5 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 5 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 6 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 6 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 6 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 6 days Norway Grants Record 75 New Offshore Exploration Leases
  • 6 days China’s Growing Appetite For Renewables
  • 6 days Chevron To Resume Drilling In Kurdistan
  • 6 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 7 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 7 days Nigeria Among Worst Performers In Electricity Supply
  • 7 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 7 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 7 days Saudis To Award Nuclear Power Contracts In December
  • 7 days Shell Approves Its First North Sea Oil Project In Six Years
CNPC Expects Robust Oil Demand Growth In China

CNPC Expects Robust Oil Demand Growth In China

Chinese state-owned oil and gas…

Can Anything Stop The Shale Surge?

Can Anything Stop The Shale Surge?

Both the IEA and OPEC…

BP Sets Up Shale Gas Operation In China

BP Sets Up Shale Gas Operation In China

UK-listed BP and China’s CNPC aren’t exactly strangers, already jointly developing Iraq’s Rumaila oilfield, but BP’s new shale gas deal with CNPC is the British company’s first foray into China—and it’s a major strategic move that gauges which way the winds are blowing in today’s energy sector.

Last week, BP announced it had signed a production sharing agreement with China’s CNPC for the development of shale gas resources in the Neijiang-Dazu deposit in the Sichuan Basin. The agreement is the next step in a framework agreement reached by the two companies last year.

But it’s much more than a simple agreement.

Related: Did Italy And Malta Actually Agree To Swap Oil Rights For Refugees?

China has been eager to exploit its shale oil and gas reserves for some time now. Unlike other hopefuls across the world, it has the territory to make shale oil and gas exploration and production viable. Fracking, which is how oil and gas are commonly extracted from shale rock, quickly exhausts the wells, so new ones need to be drilled on a frequent basis. Smaller countries simply don’t have the land to afford this. China does.

Despite the current downturn in commodities, both BP and CNPC know that this won’t last forever. They also know that gas has a brighter future than crude. BP is especially aware of this; it just learned that its final bill from the 2010 Deepwater Horizon disaster to the federal and state governments for damages stands at $20 billion. The total bill, including charges already paid for cleanup and settlements, is around $50 billion.

Related: $120 Oil As Soon As 2018?

That’s quite a bite to swallow, not to mention the damage to BP’s reputation. Just a couple of days ago, a group of high-profile environmentalists urged the British Museum to get rid of BP as sponsor because of the company’s business and strategy. According to the authors of the letter published by the Guardian, BP is not dedicated enough to remedying global climate change effects. This is hardly surprising given its line of work, but it does nothing for the company’s reputation.

Natural gas, however, is the best hydrocarbon alternative to both oil and coal, and BP and CNPC are well aware of it, as the framework agreement and this PSA show.

For BP, the move could be beneficial both in practical terms, helping it stay on its feet in the long run, with gas getting increasingly attractive at the expense of oil, and in image terms, showing the company’s readiness to place a greater emphasis on gas in the wake of the 2010 disaster.

Related: Unfolding The World’s Biggest Oil Bribery Scandal

For China, gas is also the way forward. Beijing’s New Silk Road policy involves, among other things, reducing the country’s reliance on oil and heavy industries, which have turned it into not just an economic hothouse but into one of the dirtiest, environmentally speaking, economies.

So, BP and CNPC have a win-win situation, despite cheap gas and the distant prospects of prices improving. For both companies, the PSA in Neijiang-Dazu represents not just a source of cash but also a demonstration of their interest in cleaner energy. It might not play out well in the immediate term, but it in the long term, it’s a strategic diamond.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News