Cnooc ( CEO), China's largest offshore oil and gas producer, will invest up to $1.3 billion in a new deal with Chesapeake Energy ( CHK) that will expand its presence in the U.S. shale oil and gas industry. This is the second onshore U.S. deal in four months for the state-owned Chinese company whose $18.5 billion bid for Unocal in 2005 was thwarted by a serious political backlash in the U.S. Cnooc will pay $570 million in cash for a 33% stake in Chesapeake blocks in Wyoming and Colorado, providing the company with access to Chesapeake's expertise in extracting fossil fuels from hard-to-access deposits locked in shale rock. The Chinese company will pay a further $697 million to cover part of the operational and drilling costs of the project until the end of 2014, bringing Cnooc's total expenditure to $1.27 billion. Analysts said Cnooc's minority stake in the Chesapeake development is unlikely to face regulatory opposition because the U.S. company will remain the operator of the projects. Cnooc did a similar deal with Chesapeake in October for a stake in a shale oil and gas project in Texas. "The deal provides cash-strapped Chesapeake with the money to monetize their huge resources and Cnooc the access to technology that they need," said Gordon Kwan, head of energy research at Mirae Asset Securities. Chinese oil companies, which spent more than $24 billion on overseas acquisitions in 2010, have increasingly emphasized natural gas production. China is thought to be rich in natural gas reserves, particularly deposits of "unconventional" natural gas, which refers to rock formations like shale or coal that must be cracked open to get to the gas. Unconventional natural gas has yet to be produced commercially on a large scale in China, but it has become a major focus for oil majors like CNPC and Sinopec as well as a centerpiece of government energy policies aimed at reducing fossil fuel emissions. Last year's joint acquisition by CNPC and Shell ( RDS.A) of Arrow Energy, an Australian firm specializing in coal seam gas, a type of unconventional deposit, was seen as the opening shot in a series of investments that would give Chinese companies access to some of the leading technologies for working with difficult-to-extract deposits of gas. The widespread production of unconventional gas in the U.S., which became possible thanks to technology breakthroughs in the last two decades, has caused gas prices to plummet in the U.S. The cost of benchmark Henry Hub natural gas averaged $4.41 per million British thermal units, a common industry measurement, last year, down from above $10 in 2008. Chesapeake has made a name for itself with its success in natural gas and particularly shale gas. But analysts say the Oklahoma City-based company has been hurt by falling gas prices and needs cash to bolster its balance sheet. "This second transaction with Chesapeake represents another success in our overseas development as we implement a value-driven M&A strategy," said Yang Hua, vice chairman and chief executive of Cnooc. The company announced last week that it will expand production by 8% to 12% this year, allocating around $8.8 billion for capital expenditure. Cnooc's investments in Chesapeake have focused on acreage that has shale oil, as well as shale gas, suggesting the Chinese company is trying to hedge against falling gas prices in the U.S.