BP has signed a production sharing contract (PSC) with China National Petroleum (CNPC) for shale gas exploration in the Neijiang-Dazu block in the Sichuan Basin.

Under the terms of the deal, which represents BP’s first shale gas deal in the country, the two firms will explore, develop and produce shale gas in area of approximately 1,500km2 . CNPC will be the project operator.

The PSC is a part of the framework agreement signed between the firms in 2015 on strategic cooperation covering potential shale gas exploration and production.

BP Group CEO Bob Dudley said: "We are looking forward to working together with CNPC on technology, operational and subsurface techniques in unconventional resources."

BP said it will combine its global experience with CNPC’s knowledge and experience to the Chinese unconventional gas project.

Dudley added: "We will combine this with CNPC’s knowledge and experience to bring gas to China’s growing clean energy market. China continues to be an important part of BP’s portfolio."

Scope of the deal includes potential fuel-retailing ventures in China, exploration of oil and liquefied natural gas (LNG) trading opportunities globally, as well as carbon-emissions trading.

It also includes sharing of knowledge around low carbon energy and management practices.

CNPC Chairman Wang commented: "By leveraging the parties’ complementary advantages, CNPC and BP will jointly realize the efficient development of unconventional resources."

According to BP’s latest Energy Outlook, shale gas is estimated to account for a quarter of the total gas produced globally by 2035. China is expected to become the world’s largest shale gas producer.

BP China president Edward Yang said: "As a new strategic industry for China, the exploration, development and production of shale gas will significantly benefit China’s energy mix in a long run."