Royal Dutch/Shell yesterday agreed to set up a joint venture (JV) with the Bureau of Geological Exploration and Mineral Development of Jilin Province to conduct oil shale resource studies in the Northeast China province.
If reserves are proved commercially developable, trial explorations will be launched. Commercial exploitation will follow later on, should experiments succeed.
The agreement reflects China's latest efforts to search for oil to ease energy shortages.
Under the agreement, the two partners hope to establish a synthetic transportation fuels and power industry based on future successful exploration.
According to financial news agency AFX, the two partners will invest up to US$30 million in the exploration phase of the JV.
Oil shale is a compact rock containing organic matter that yields petroleum when destructively distilled. Compared to conventional oil reserves, it is far more costly and requires more complicated technology to produce oil from oil shale.
"Conventional oil reserves are like a sponge. When it is squeezed, the oil will ooze. Oil shale, however, is like a hard rock that is difficult to extract oil from," said an engineer from China National Petroleum Corp, the nation's largest oil company.
China is estimated to have the fourth largest shale deposits in the world at 31.57 billion metric tons, after the United States, Brazil and Russia.
Jilin holds 17 billion tons, or 56 per cent, of China's oil shale deposits.
In June this year, China's National Development and Reform Commission, the country's top economic planning body, approved a major oil shale project in Jilin with an estimated investment of 2.75 billion yuan (US$332.5 million).
Shell is one of four Dutch companies, including DSM NV, Phillips and Telfort BV, that signed agreements yesterday to work with Chinese counterparts at yesterday's EU-China Summit in The Hague.
The co-operations include equity investment in a Chinese pharmaceutical company, building a research and development park in Shanghai, and providing telecommunications service in the Netherlands.