As part of the deal, the company will explore, develop and produce shale gas, along with China National Petroleum (CNPC) in the Fushun-Yongchuan block in the Sichuan Basin, reported The Wall Street Journal.
The contract has been approved, a year after Shell and CNPC signed a deal in March 2012 to develop the shale gas reserves.
The contract details have not been disclosed, however the approval indicates that authorities in Beijing have developed the regulatory framework for international investment to develop the shale reserves.
China, which is estimated to hold the world’s largest shale gas reserves, plans to use western technology to replicate the shale gas boom, which is transforming North American energy markets.
The country is also planning to develop the new liquefied natural gas (LNG) export facility at Kitimat.
Shell CEO Peter Voser was quoted by the publication as saying that drilling will commence in China in 2013 and 2014.
Voser said that the company is committed to help Beijing achieve its shale-gas production targets.
