NYSE listed ADRs of PetroChina Co. Ltd. (PTR - Analyst Report) gained over 6% following reports that it has formed a joint venture (JV) with Sinochem Corp. and two state-owned companies to tap shale gas in China.

The Chinese energy giant, along with the other JV members has established Chongqing Shale Gas Exploration and Development Co Ltd to extract shale gas from five blocks located southwest of China. The JV has been set up with a capital of approximately $975 million.

The blocks, spread across 15,600 square kilometers, are located near the Chongqing municipality. The JV is expected to drill 16 test wells and 360 production wells in the region and spend over $4 billion on the development of the blocks. Commercial production is anticipated to start in 2017.

Forming this JV could prove an important move for all the parties involved, considering that China is home to the world’s largest recoverable shale reserves. The companies have drilled about 400 wells and are expected to produce 1.6 billion cubic meters of shale gas in 2014, though this is a very small fraction of the nation’s total gas demand.

PetroChina is the majority stake owner in this JV with a 40% interest. Sinochem holds a 20% stake, whereas Chongqing’s State Development and Investment Corp. and Chongqing Institute of Geology and Mineral Resources – the two local firms – hold stakes of 39% and 1%, respectively.

PetroChina, the largest integrated oil company in China, currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked players from the broader energy sector include Seadrill Partners LLC (SDLP - Snapshot Report), Cheniere Energy Partners LP. (CQP - Snapshot Report) and Murphy USA Inc. (MUSA - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).