Shale gas deal just the start for China: Officials

China is ready to give the nod to more energy production-sharing deals with international companies, after announcing officials had approved a shale gas exploration deal between China National Petroleum Corporation and Royal Dutch Shell plc.

"It is just the start, and many other foreign companies, like Total, are looking for government approval on other production-sharing contracts," said Che Changbo, the deputy director of the Oil and Gas Research Center under the Ministry of Land and Resources.

Che added the country is open to all kinds of participants in shale gas exploration.

China has held two shale gas auctions since 2011, with no foreign-funded joint ventures winning either.

"More cooperation deals of the kind signed between Shell and CNPC will be released gradually," he said.

The contract - covering 4,000 square kilometers of the Fushun shale gas block in Sichuan province - is the first of its kind to be approved by China, and is considered an important step in accelerating the country's shale gas exploration activities and enhancing its drilling techniques, according to Che.

Huibert Vigeveno, executive chairman of Royal Dutch Shell China, said the approval will allow it to acquire more know-how about the geological condition of China's shale gas blocks, and drilling plans over the next two years.

"In China we are drilling fewer wells than in North America, but they are expected to realize better profits," said Vigeveno.

"Based on the progress being made in the sector in China, we believe China can realize its goal of reaching commercialized production of shale gas by the end of 2015," he said.

China set the goal of producing 6.5 billion cubic meters of shale gas a year by the end of 2015 in its 12th Five-Year Plan (2011-15), and the National Energy Administration estimates the annual output of the unconventional resource to reach 100 billion cu m by 2020.

The Ministry of Land and Resources estimates that China has 25 trillion cu m of recoverable shale gas. Annual recovery of the gas is expected to reach 200 billion cu m by the end of 2015.

Che said he was happy that the country was headed towards achieving that goal, but declined to release any finer details of the product sharing contract or the production capacity of the block just approved, saying that all of the work done so far is exploratory.

Gerald Schotman, Shell's chief technology officer, said the company would be working closely with its Chinese partners on new innovations, describing the local conditions are "very different".

However, he added it will take further research and development to bring the cost of shale gas exploration down, and find ways of accelerating work in future.