The Anglo-Dutch oil giant will work together with PetroChina Co. (NYSE:PTR) to drill, engineer, procure and construct the Changbei natural gas field. The project is expected to cost about $600 million and should be completed by 2007. The drilled gas will be sold largely to markets in Beijing, Shandong, Hebei and Tianjin, Shell said.

The project will deliver 1.5 billion cubic meters each of natural gas in 2007 and should double by 2008, Shell said.

Shell has entitlement to about 50 percent of gas volume over the next 20 years.