Mining giant BHP Billiton expects its US shale oil business to become one of its major sources of revenue by the end of the decade, generating almost $US3 billion ($A3.30 billion) a year in free cash flow by 2020.

BHP is investing around $US4 billion per year into the US shale business, which it expects to be self-funding by 2016.

The company’s total US onshore business is expected to produce 500,000 barrels of oil equivalent per day by 2017, the company said.

“Onshore US is well positioned to become another major cash flow generator for BHP Billiton,” the company’s head of petroleum and potash Tim Cutt said in a statement on Wednesday.

Mr Cutt said the company had identified a focus area within Texas’ shale oil Permian Basin, where it was pursuing a development that would yield 100,000 barrels of oil equivalent per day.

He also said the company’s conventional oil and gas portfolio was expected to maintain steady production in the medium term and BHP was focusing on low-risk, high-return investments in proximity to existing infrastructure.

The company expects total oil and gas production to be around 250 million barrels of oil equivalent for the 2014 financial year.