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BP Signs Second Chinese Shale Gas Agreement with CNPC

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BP plc (BP - Free Report) recently announced that it has inked a production sharing contract (PSC) with China National Petroleum Corporation ("CNPC") for shale gas exploration, development and production.

The PSC, which was signed on Jul 27, 2016, pertains to an acreage of about 1,000 square kilometers at Rong Chang Bei in the Sichuan Basin. CNPC will operate the block.

This is the second contract between BP and CNPC. The first PSC was signed in Mar 2016 and related to the adjoining Neijiang-Dazu block. The companies had also entered into a framework agreement on strategic cooperation in Oct 2015.

The latest PSC emphasizes BP’s commitment to explore and develop unconventional resources in China. The framework agreement includes potential future fuel retailing ventures in China, promising new oil and LNG trading opportunities globally and carbon emissions trading as well as knowledge sharing around low carbon energy and management practices.

Given that China is one of the emerging markets, it plays an important role in the transformation of the global energy mix and targets to boost the percentage of gas in its overall primary energy consumption. China is now being looked at from a more strategic point of view as the exploration, development and production of shale gas is anticipated to benefit the country’s energy mix considerably in the long term. China is expected to become the world’s largest contributor to growth in shale gas production.

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BP’s access to one of the largest growth regions for shale gas production is highly noteworthy. In terms of assets, BP owns a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. The group’s strong inventory of development projects should support volume growth in the long run.

BP currently holds a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector are Devon Energy Corporation (DVN - Free Report) , NGL Energy Partners LP (NGL - Free Report) and Enbridge Energy Partners L.P. . All these stocks sport a Zacks Rank #1 (Strong Buy).

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