Royal Dutch Shell has signed an agreement with Sinopec to explore the Dongying trough of Shengli in China’s eastern province of Shandong as part of the country’s efforts to discover new oil reserves.

Angus Rodger, research director of Asia-Pacific upstream at Wood Mackenzie, said, shale oil makes up less than one percent of China’s crude output. “China’s shale oil has very low permeability, which means very low per well output that makes the economics hard to work,”a spokesperson from China’s Ministry of Natural Resources said.

Sinopec is confident that Shell’s expertise in shale oil exploration could help it to generate huge profits from the exploration at Shengli oil reserves.

According to experts, the country’s shale oil reserves are found in its eastern regions such as the Songliao and Bohai Rim basins, and North China’s Ordos and Junggar basins are also believed to hold shale oil in high concentration.