Energy-hungry China will sign another major natural gas contract this week, its second deal in less than a month’s time, as the country races to match rising energy demand and curb pollution from coal plants.
Oil giant BP PLC announced the $20 billion long-term contract on Tuesday at the World Petroleum Congress in Moscow. The British fuel producer will supply liquefied natural gas, or LNG, to state-owned China National Offshore Oil Corporation for 20 years, the Wall Street Journal reported.
British Prime Minister David Cameron and Chinese Premier Li Keqiang will preside over the formal signing in London this week, WSJ said.
The agreement marks one of BP’s largest deals to date with Beijing, and it is expected to involve supplying China with LNG from projects globally, Sky News noted.
“It is a fair price for them and a fair price for us. It is a good bridge between the U.K. and China in terms of trade,” Bob Dudley, BP’s chief executive, told reporters.
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LNG is made by cooling natural gas until it becomes a clear, colorless liquid and is used to heat homes, to generate electricity or as an alternative transportation fuel. As a liquid, it takes up much less space than traditional natural gas and is therefore cheaper to transport and store.
Proponents of LNG say the fuel can help countries to reduce their global warming emissions since it is less carbon-intensive than coal. But the process of extracting, processing, chilling and shipping the chilled liquid fuel releases large amounts of carbon dioxide, and the fuel itself releases methane—another greenhouse gas.
The BP-China LNG deal follows a $400 billion natural gas agreement in May between state-owned China National Petroleum Company and Russian gas giant Gazprom to pipe the fuel from Siberian wells to China's main consumption centers.