BP Plc agreed to supply liquefied natural gas to China Huadian Corp. in a deal worth as much as $10 billion over two decades.
The London-based company will supply as much as 1 million metric tons of LNG annually to the Beijing-based company that operates power stations, according to an e-mailed statement. BP and China National Petroleum Corp., the country’s biggest oil producer, also agreed to jointly explore and produce shale gas in China’s Sichuan basin and retail fuels in the nation, according to a separate statement.
The agreements are part of a host of deals signed during Chinese President Xi Jinping’s visit this week to London. Prime Minister David Cameron said Xi would bring more than 30 billion pounds ($46 billion) in deals and investment on his visit.
The partnership with CNPC “not only strengthens the relationship between the U.K. and China’s largest energy companies, it further cements the relationship between China and the U.K. as global business partners,” BP’s Chief Executive Officer Bob Dudley said in the statement.
BP and CNPC also agreed to explore oil and LNG trading opportunities globally, work together on carbon emissions trading, and share knowledge around technology and management practices, according to BP’s statement. CNPC’s unit PetroChina Co., the world’s second-biggest oil company by market value, has been BP’s partner in the Rumaila oil field in Iraq since 2009.
The LNG supply agreement with China Huadian builds on BP’s agreement with Cnooc Ltd. last year to supply 1.5 million tons a year of the chilled gas for two decades starting 2019 -- a deal valued at $20 billion at the time. BP and its peers including Royal Dutch Shell Plc and Total SA, are targeting higher gas production and sales as a way to counter declining oil prices. Gas is also at the center of those companies’ efforts to reduce carbon emissions and combat climate change.
BP supplies LNG from several countries including the Tangguh project in Indonesia, in which it has a 37 percent holding. The company also has a stake of more than 17 percent in the planned Browse project in Western Australia, operated by Woodside Petroleum Ltd.
Asia is the world’s largest destination for LNG, led by Japan and South Korea. The continent will remain the biggest consumer in the next two decades at least, accounting for more than 70 percent of global demand, according to BP’s Energy Outlook 2035. China will become the second-largest importer of the chilled fuel by 2035, after Japan.