Shell signs shale gas production sharing contract with China

Royal Dutch Shell has signed a production sharing contract with state-owned China National Petroleum Corporation (CNPC) for shale gas in China - the first of its kind in the country.

China is estimated to hold some of the largest reserves in the world of shale gas, which is gas trapped in rock formations. It started the shale push in late 2009, inspired by a shale boom in the US. However, China has been slow to develop the industry because of a lack of technical expertise.

"China has huge shale gas potential and we are committed to making a contribution in bringing that potential into reality," said chief executive Peter Voser, adding that Shell would apply "its advanced technology, operational expertise and global experience" in the project to jointly develop the shale gas resources with CNPC.

The country has set a target of 2015 by which to start production of shale gas. The National Energy Administration (NEA), China's energy agency, officially unveiled on Friday a target to produce 6.5 billion cubic metres (bcm) of shale gas by 2015, equivalent to about 6% of China's current total gas production.

In fact, according to the US Energy Information Administration, the Chinese government has targeted between 8% and 12% of total natural gas production from shale gas by 2020.

Other foreign firms that have signed agreements to look for shale gas in China include BP, Chevron and Total.

Matterley Asset Management's George Godber considers what we can expect from the oil mammoth in: The role of Shell in a portfolio.