China National Offshore Oil Corporation, the country's largest offshore oil producer, on Wednesday signed two production-sharing contracts with Royal Dutch Shell PLC to explore a pair of offshore oil blocks in the South China Sea.

The blocks, 62/02 and 62/17, lie in the Yinggehai basin off China's Hainan island, according to the agreement.

Shell will undertake 100 percent of the exploration costs in the blocks while CNOOC can take up to 51 percent of equity interest in any commercial oil and gas discovery in the blocks.