HONG KONG, Aug 19: Western oil firms Royal Dutch/Shell and Unocal Corp signed a multi-billion-dollar deal on Tuesday with China to tap offshore gas fields for clean fuel to feed the energy-hungry east of the country.

Chinese majors CNOOC Ltd and China Petroleum and Chemical Corp (Sinopec) will each have 30 per cent of the partnership, while Shell and Unocal will take 20 per cent each, the Chinese side said in separate statements. First gas is targeted for 2005.

Chinese Premier Wen Jiabao said he hoped the four companies would help guarantee energy supplies for the booming Yangtze River Delta, where China’s commercial capital Shanghai is located, Xinhua news agency said.

The contracts were signed at the Great Hall of the People in Beijing after more than a year of talks, a relatively quick outcome for foreign oil firms which have sometimes spent years negotiating a position in China’s energy sector.

The signing represents another major stake in China’s energy sector for Shell, which is leading the pack of foreign oil majors racing to gain a foothold in the gas sector.

“Shell is blowing ExxonMobil and BP out of the water when it comes to gas in China,” said an industry source who declined to be identified.

Shell already has Chinese investments upstream, in petrochemicals and liquefied natural gas.

It is also consortium leader of the West-East gas pipeline, one of China’s largest investment projects, expected to cost some $5.2 billion. A source said on Monday the Anglo-Dutch group had become the first foreign oil firm to win government approval to set up retail petrol stations.

The Xihu gas contracts cover three exploration and two development areas of the Xihu Trough, spanning about 22,200 square kilometres, about 400 kilometres off the coast of Shanghai.

A Sinopec source said Unocal, which has worked to promote exploration of the Xihu Trough for eight years, expected total investment in the projects to reach as much as $10 billion.

Unocal, which has Chinese interests in liquefied petroleum gas, said on its Web site the trough had 283 billion cubic metres of estimated recoverable gas reserves.

The first development would be the 700 sq-km Chunxiao fields with an investment of about $1 billion, aiming to produce 2-2.5 billion cubic metres of gas a year for Zhejiang province and Shanghai through a 350-km pipeline.

A senior Sinopec official said Chunxiao has recoverable gas reserves of about 100 billion cubic metres.

A Shell spokeswoman in London said gas produced would be marketed to industrial customers and power plants. No contracts had been secured yet and discussions are ongoing, she said.—Reuters