British fuel giant BP has signed a contract to supply China National Offshore Oil Corporation (CNOOC) with liquefied natural gas (LNG), Chief Executive Bob Dudley said at a conference in Moscow.
“It is a 20-year supply agreement on LNG. It is a fair price for them and a fair price for us. It is a good bridge between the UK and China in terms of trade,” Dudley said.
Last month China locked in a 30-year piped gas supply deal with Russia’s Gazprom (GAZP.MM) worth around $400 billion.
The contract is for the supply of LNG to the state China National Offshore Oil Corporation (CNOOC) over 20 years. The deal is valued at more than 20 billion dollars. Royal Dutch Shell also extended an agreement with CNOOC to work on energy projects around the world, including LNG.
Both BP and Shell will also engage in the exploration and extraction of shale gas in China. The country has the largest estimated gas resources in the world (over 32 billion m3).
The two contracts create real competition to Gazprom and other Russian corporations, which are planning to sell liquefied natural gas to the Chinese market. The companies in question include: Rosneft (planned LNG plant on Sakhalin), Novatek (Yamal Peninsula) and, of course, Gazprom, which wants to build a second gas liquefaction plant in Vladivostok and increase the capacity of the existing plant in Sakhalin.
Despite being the world’s largest holder of natural gas resources, Russia is not a major player in the global LNG market. So far it has managed to build one liquefaction plant with a capacity of 10 million tonnes per year which constitutes 5 per cent share of the global market.
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