BP signs 2nd deal with China to exploit shale gas reserves

Britain's BP has signed a second major co-operation deal with China's state petroleum company in a bid to tap the country's enormous shale gas reserves.

The deal with China National Petroleum Corporation (CNPC) covers the exploration and production of shale gas across a 386 square mile area at Rong Chang Bei in the Sichuan Basin. It follows a similar agreement in March this year to develop the adjoining Neijiang-Dazu block.

BP boss Bob Dudley said the latest deal built on the ''successful co-operation we are already seeing''.

''We are pleased to be making further progress in our strategic partnership with CNPC and deepening our business in China. This new [deal] 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,'' he added.

According to BP's latest annual report on global energy trends shale gas, which is extracted using the controversial process of hydraulic fracturing or 'fracking', is set to emerge as a major source of the world's gas. By 2035 shale gas will account for a quarter of the total gas produced globally and China will become the world's largest contributor to growth in shale gas production, the report predicts.

 Dudley added, BP was pleased to be making further progress in its strategic partnership. China's energy demand is expected to rise substantially in the coming years as its economy grows and the living standards of its population climb.

As a result BP says the country will play ''a vital role'' in transforming the global energy mix as it aims to meet this growing demand from a greater proportion of gas rather than coal-fired power, which is more polluting.

In October last year BP signed a wide-ranging energy co-operating agreement with CNPC covering Chinese shale production, fuel retailing ventures and trading opportunities for transportable oil and gas. The agreement also includes sharing of knowledge on carbon emissions and low-carbon energy options.

Edward Yang, BP's China president, said, ''The two recently signed shale gas [deals] 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.

''China is important for global energy markets and for all BP's businesses,'' he added.