European oil major Royal Dutch Shell PLC RDSA said Tuesday that its early drilling results for shale gas in China are encouraging and it now expects to make its development in the country a profitable proposition.

Shell signed the first production-sharing contract to explore, develop and produce shale gas in China in March, a move that fits in with China's overall strategy to bring technical and operational know-how to the development of its untapped reserves of the unconventional fuel.

"We are very pleased with the progress there," chief executive Peter Vosel said at a press conference.

"It is geologically more complex, but I think we can achieve similar cost optimization and progress like we have done in North America. We think we can make this a profitable proposition, and that's what we're seeing with the encouraging results so far," he said.

Under the agreement signed earlier this year, Shell will apply its technology, operational expertise and global experience" to jointly develop shale gas with state-controlled China National Petroleum Corp. over a 3,500-square-kilometer area in the Fushun-Yongchuan block in the Sichuan Basin.

("Shell CEO: China Shale Drilling Results Are Encouraging," at 0334 GMT, misstated the last name of Shell's chief executive in the third paragraph. The correct version follows:)

KUALA LUMPUR--European oil major Royal Dutch Shell PLC /quotes/zigman/379078/quotes/nls/rds.a RDS.A +0.34% said Tuesday that its early drilling results for shale gas in China are encouraging and it now expects to make its development in the country a profitable proposition.

Shell signed the first production-sharing contract to explore, develop and produce shale gas in China in March, a move that fits in with China's overall strategy to bring technical and operational know-how to the development of its untapped reserves of the unconventional fuel.

"We are very pleased with the progress there," chief executive Peter Voser said at a press conference.

"It is geologically more complex, but I think we can achieve similar cost optimization and progress like we have done in North America. We think we can make this a profitable proposition, and that's what we're seeing with the encouraging results so far," he said.

Under the agreement signed earlier this year, Shell will apply its technology, operational expertise and global experience" to jointly develop shale gas with state-controlled China National Petroleum Corp. over a 3,500-square-kilometer area in the Fushun-Yongchuan block in the Sichuan Basin.