ROYAL Dutch Shell has entered China’s shale oil sector, signing an agreement with State-owned Sinopec to study an East China block, part of the nation’s early efforts to unlock the potentially massive unconventional resource.

China is already in the initial stages of developing its vast shale gas resources, with production last year making up 6 percent of total gas output after more than a decade of work. China’s shale oil is at an even more basic phase due to challenging geology and hefty development costs, experts said.

Shale oil makes up less than 1 percent of China’s crude output after several years of development, according to Angus Rodger, research director of Asia-Pacific upstream at Wood Mackenzie.

Sinopec said Monday it had agreed with Shell to study the Dongying trough of Shengli in Shandong Province, without giving further details.

Shell confirmed the joint study agreement, but did not offer further comment.

That makes Shell one of the few international oil and gas explorers venturing into China’s shale oil sector, and follows the Anglo-Dutch company’s exit from shale gas drilling in Si-chuan Province after spending at least US$1 billion and getting unsatisfactory results.

The Dongying trough is part of the Bohai Rim Basin, where top Chinese oil and gas group China National Petroleum Corp. (CNPC) said in February that it is developing another small shale oil field with an annual output of 50,000 tons this year.

(SD-Agencies)