(EnergyAsia, March 22 2012, Thursday) — China National Petroleum Corporation (CNPC) and Shell China Exploration and Production Company Limited, a subsidiary of the European major, said they have signed what could be the country’s first shale gas production sharing contract (PSC).

Still to be approved by the Chinese government, the contract is for the exploration, development and production of shale gas in the 3,500-km Fushun-Yongchuan block in China’s Sichuan Basin.

Zhao Zhengzhang, a PetroChina Company Limited vice president, and Lim Haw-Kuang, executive chairman of Shell Companies in China, signed the contract at a ceremony in Beijing this week witnessed by CNPC chairman  Jiang Jiemin and Royal Dutch Shell CEO Peter Voser.

Shell said it will apply its advanced technology, operational expertise and global experience in the project to jointly develop the shale gas resources with CNPC.

Mr Voser said: “We are delighted about this new milestone in our strategic cooperation with CNPC. China has huge shale gas potential and we are committed to making a contribution in bringing that potential into reality.”

China is partnering Shell as it lacks the technology and technical expertise to tap its shale reserves, estimated at more than 25.08 trillion cubic metres or 886 trillion cubic feet to meet the country’s fast-growing energy demand.

The government has set a target to triple the use of natural gas by 2020 to meet 10% of the country’s energy demand, and to produce 6.5 billion cubic metres of shale gas a year by 2015 rising to 80 billion by 2020.