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Europe’s largest oil company Royal Dutch Shell plc (RDS.A - Analyst Report) and Chinese energy giant PetroChina Co. Ltd. (PTR - Analyst Report) are producing natural gas from their Changbei project at a much cheaper rate compared to similar developments. In fact, the direct unit operating cost – at around $1 per barrel of oil equivalent – is 91% less than the average lifting cost expended by PetroChina in 2012.   

The first phase of the Changbei joint venture in northern China’s Shaanxi province came online in 2007 and is set to churn out 3.3 billion cubic meters of natural gas annually at its peak.

Shell and PetroChina are looking expand their operations in the field, as China moves to reduce its energy dependence from coal to cleaner sources like natural gas. At present, two-thirds of China's electricity is generated by coal-fired power plants, which emit greenhouse gases that lead to pollution.

Shell has invested $1 billion in China this year, as it tries to tap the country’s huge unconventional gas potential. The supermajor – operator of the Changbei development – said that it is drilling additional test wells in the second phase of the project, which is expected to bring a significant amount of output.

Royal Dutch Shell and PetroChina are two of the biggest integrated energy firms in the world with a strong and diversified portfolio of development projects that offer attractive long-term opportunities. Both the stocks carry a Zacks Rank #3 (Hold), implying that they are expected to perform in line with the broader U.S. equity market over the next one to three months.

However, some better-ranked energy stocks include SM Energy Co. (SM - Analyst Report) and Abraxas Petroleum Corp. (AXAS - Snapshot Report). These domestic upstream energy operators – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories with potential to rise significantly from current levels.

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