British Petroleum Pulls Out Of China Shale Exploration

BP petrol station
FILE PHOTO: The logo of BP is seen at a petrol station in Kloten, Switzerland October 3, 2017. (Photo: REUTERS/Arnd Wiegmann/File Photo)

British Petroleum recently announced that the company will be pulling the plug of its shale drilling operations in China. The company cited poor exploration results as one of the main reasons behind the pullout. While the company has yet to officially announce this decision, a number of insiders with knowledge of the plans have told Reuters about the impending pullout.

BP and the China National Petroleum Corporation signed a production sharing contract back in 2016. The contract was for the exploration, production, and devilment of shale gas.

The base of operations was established in the Neijiang-Dazu block which is located in the Sichuan Basin located in the southwestern region of China. Later that year, BP signed a second production sharing contract deal with the CNPC for shale gas exploration which is based at Rong Chang Bei, also located in the Sichuan Basin.

According to the sources from Reuters, BP is withdrawing its operations because of poor results. BP is not the first company to pull out of shale gas drilling in China.

A number of major companies have already ceased operations due to poor results, and a number of aggravating factors. Among these companies are ConocoPhillips, Exxon, Shell, and Eni. With private companies leaving their operations in China, the shale gas drilling in the country will be predominantly operated by large Chinese state-owned energy companies.

BP Chief Executive Bob Dudley said during an energy conference last week in Shanghai that the company is facing "great challenges" with regards to its shale gas drilling operation in China. Among the main factors affecting the company's operations is China's complex geological structure.

Despite the challenges faced by the shale gas exploration industry, China continues to push through with new innovations.

The country has developed a keen liking to unconventional natural resources as its demand for crude oil and other natural gas continue to increase. Another compounding factor is the fact that China's current domestic production of natural gas cannot meet the growing demand.

Over the past few years, China's biggest energy producers have established operations on a number of tight oil and gas wells. The main goal behind this expansion of operation is to enhance domestic production of oil and natural gas in the country.

Although BP's exit might deter the industry, Shell has recently signed an agreement with China's Sinopec. The agreement states that the two parties will world together in the study of the potential development of shale oil in China's eastern region.

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