London - A $20 billion (R214bn) liquefied natural gas (LNG) deal and a move to strengthen London’s position in offshore yuan trading crowned the visit by Chinese Premier Li Keqiang to Britain yesterday.
In a trip aimed at burying a row over Tibet and at the same time deepening commercial ties between the world’s second-largest economy and Europe’s financial capital, Li met Queen Elizabeth and was due to hold talks with Prime Minister David Cameron.
Li, number two in the ruling Communist party, is expected to preside over up to $30bn in business deals. Investors will be looking closely for any signals he may send about the future of Asia’s largest economy.
Oil major BP signed a deal worth around $20bn to supply China National Offshore Oil with LNG cargoes. The agreement was signed in London by BP executive vice president, Dev Sanyal and CNOOC chairman, Wang Yilin, in presence of Cameron and Li
“It is a 20-year supply agreement on LNG. It is a fair price for them and a fair price for us. It is a good bridge between the UK and China in terms of trade,” said BP chief executive Bob Dudley.
The deal will have a similar pricing structure, following sustained efforts by China’s National Development and Reform Commission to cap a surging fuel import bill.
“After missing out on a deal to sell LNG to Taiwan last year, BP has now found a Chinese buyer for its Freeport volumes, which in pricing terms will have elements of US as well as oil pricing,” a source said.
Last month China locked in a 30-year piped gas supply deal with Russia’s Gazprom worth around $400bn.
BP already ships cut-price LNG to China National Offshore Oil from its Indonesian export plants under an agreement signed years ago.
China’s ability to command lower prices comes at a time when the world’s two biggest LNG buyers, Japan and South Korea, are being hit hard by high import costs, perhaps underscoring China’s status as a market that no producer can afford to miss.
Energy demand in Japan and South Korea is not expected to log nearly the same growth rates as China, especially as authorities re-orient towards a more gas-based economy.
BP has access to LNG produced in Trinidad, Angola, Egypt and Indonesia, with two new export facilities due to come on stream in Australia in coming years.
China, whose $9 trillion economy is more than three times the size of Britain’s, wants to use the visit to put differences over Tibet behind it. Britain’s relations with China took a nosedive in 2012 after Cameron met the Dalai Lama, the Tibetan spiritual leader who Beijing says is a separatist. Ties have recovered somewhat since, and Cameron visited China last year.
Beijing warned London on the eve of Li’s visit not to lecture it on the subject if it wanted good economic ties.
British Deputy Prime Minister Nick Clegg said on Monday that the people of China were politically shackled to a Communist one-party state.
“We can’t ignore the large scale and systematic human rights abuses, which still continue in China to this day,” Clegg, who leads the Liberal Democrat coalition partners of Cameron’s Conservatives, told reporters.
China views Britain, the world’s sixth-largest economy and home to the only financial capital to rival New York, as Europe’s most open place to do business.
Its firms are keen to invest in major nuclear and high-speed rail projects.
In an attempt to attract more of China’s big-spending tourists, Britain’s government said it would make its notoriously complex visa system easier to navigate. – Reuters