PetroChina Co. (00857.HK; 601857.SH), the Chinese largest oil and natural gas producer announced in a statement on February 20 to partner with American ConocoPhillips (NYSE: COP) to develop shale gas in China.

PetroChina will acquire ConocoPhillips' Australian assets in the Poseidon offshore program (20 percent) and in the Goldwyer Shale onshore project (29 percent). Meanwhile, the two companies will team up to study the irregular natural gas resources in the Neijiang-Dazu Boloc in China's Sichuan Basin.

ConocoPhillips said in the statement that this agreement with PetroChina was significant for the company's growth plans in both China and Australia.

According to China shale gas development planning, the annual output of shale gas in China will reach 6.5 billion m3 by 2015 and increase to 60 to 100 billion m3 by 2020.

In fact, China has the world's largest shale gas reserves, but the cost for the commercial development is very high.

In order to encourage the shale gas exploration and development to increase the natural gas supply, China Ministry of Finance has offered special project fund to subsidy companies conducting shale gas exploitation. The subsidiary standard is 0.4 yuan per m3 from 2012 to 2015.