Royal Dutch/Shell signed an agreement on Thursday 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 there.

If reserves prove viable, trial explorations will be launched and commercial exploitation could follow later on.

The agreement reflects China's latest efforts to search for more oil to ease energy shortages.

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 after the US, Brazil and Russia – a total of 31.57 billion metric tons.

Jilin contains 17 billion tons, 56 percent, of these deposits.

In June this year the 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 European companies, including DSM NV, Phillips and Telfort BV, that signed agreements on Thursday to work with Chinese counterparts at Thursday's EU-China Business Summit in The Hague.

The cooperation includes equity investment in a Chinese pharmaceutical company, building a research and development park in Shanghai, and providing telecommunications services in the Netherlands.

(China Daily December 10, 2004)