Chevron said it would sell a 30 per cent stake in its Canadian oil shale holdings to Kuwait’s state-owned oil company for $1.5 billion.

The deal with Kuwait Foreign Petroleum Exploration Co helps Chevron reduce production risk and gives it more capital to increase drilling in Alberta’s Duvernay shale formation, one of North America’s largest shale deposits.

The deal, valued at about $15,000 per acre, boosts land valuations in the region and should help increase drilling, a step that will likely reduce production costs to about $12 million per well, down from about $15 million to $20 million currently, analysts at investment bank Tudor Pickering Holt said in a note to clients.

Chevron’s Canadian subsidiary has exploration leases for about 330,000 net acres (1,335 sq km) in the Duvernay shale formation. The area is located about 124 miles (200 km) northwest of Edmonton, Alberta.

The deal also creates a partnership for appraisal and development of liquids-rich shale resources in the Kaybob area of the Duvernay, Chevron said.

After the deal closes in November, Chevron Canada will remain the operator and will hold a 70 per cent interest in the project.

The deal price includes a portion of Chevron Canada’s share of future capital costs for the joint venture.

Allen Good, senior equity analyst at Morningstar, said the divestment was not a comment on the quality of Chevron’s Duvernay assets but rather a way to cut spending at a time when the company has a number of major projects underway.

“I see this as a way to reduce capital spending but still retain exposure to a potentially lucrative play,” Good said, adding that Kuwait Foreign Petroleum Exploration Co did not offer any particular expertise.

“It’s simply a funding source that historically Chevron would not have looked at, but they are spending a lot on developing LNG and offshore so are looking at monetising some of their assets sooner than they normally would.”

Duvernay is widely viewed as one of North America’s most promising shale fields. Chevron boosted its holdings in the field in August 2013, buying 67,900 net acres from Alta Energy Luxembourg.