One of China’s biggest oil companies signed a $20 billion deal with BP PLC (BP) for liquefied natural gas deliveries, and announced a strategic partnership with Royal Dutch Shell PLC (RD), in a flurry of activity marking a three-day visit to the UK by Chinese Premier Li Keqiang.
Li also repeated China’s interest in financing the construction of the next generation of nuclear power plants in the UK, although there were no firm deals struck due to the ongoing uncertainty over whether the government’s policy on new nuclear build breaks European Union law on state aid.
The deal with BP is the latest in a series of mega-deals illustrating China’s insatiable demand for clean-burning gas, as pollution from coal-fired power plants and vehicle use threatens to reach crisis levels in many of its cities. Only last month, China signed a much larger $400 billion 30-year deal to import gas from Russia. That deal, ironically, was based in part on supplies of gas from fields in eastern Siberia which BP’s former joint venture in Russia had been squeezed out of as Vladimir Putin’s Kremlin assumed more direct control of the country’s mineral wealth.
The Chinese deal is a welcome piece of good news for BP after repeated disappointments in the U.S. as it struggles with the aftermath of the Deepwater Horizon disaster. It will see BP will deliver up to 1.5 million tons a year of LNG–equivalent to 72 billion cubic feet of gas–to China National Offshore Oil Company, or CNOOC, for 20 years from 2019 onwards. It’s not yet fixed where the gas will come from, but BP has a global portfolio of LNG assets, including the opportunity to export from terminals in the Gulf of Mexico. It already supplies LNG to CNOOC from Indonesia.
The office of UK Prime Minister David Cameron, in an ostentatious display of coyness, made no mention of the deal in briefing notes on Li’s visit, focusing instead on a list of less controversial deals involving furniture and children’s TV programs. Cameron has been accused in the past of pandering to China on human rights issues such as the treatment of Tibet and China’s minorities in order to win big trade deals.
Li also confirmed that China would lift a ban on imports of beef from Britain that has been in place since contaminated feed triggered a widespread outbreak of Bovine spongiform encephalitis, or Mad Cow Disease.