The China United Coalbed Methane Corp Ltd (CUCBM) signed a production-sharing contract with the US firm Asian American Coal Inc in Beijing on Friday to jointly exploit the coalbed-methane resources in North China's Shanxi Province.

It was the 21st such contract CUCBM has signed with a foreign company, said Sun Maoyuan, the firm's president.

This suggests more and more foreign companies are beginning to show interest in China's coalbed-methane industry, he said.

So far, international firms have participated in coalbed-methane exploration efforts here covering an area of 33,300 square kilometers, he said.

"They have invested more than US$90 million in 20 previous projects."

The new one, located in Shanxi's Mabi area, covers an area of around 1,371 square kilometers.

About 240 billion cubic meters of coalbed methane is thought to be in the area, Sun said.

Under the contract, the US company will shoulder risks and expenditures during a five-year exploration period.

During development and production, the two sides will share production in accordance with amounts they have invested.

The project is close to the west-east gas pipeline, which will facilitate the transportation and sale of coalbed methane, Sun said.

"Coalbed-methane development is of strategic significance for the adjustment of the energy structure in China," he said.

To prevent gas explosions, China emits 6 billion cubic meters of methane from mines annually, seriously polluting the environment and wasting energy resources.

At the same time, the country is plagued by an ever-increasing shortage of petroleum.

China could tap coalbed methane as a new clean fuel source to achieve both ecological and economic benefits, Sun said.

The Chinese Government has paid great attention to the utilization of coalbed methane, he said.

To speed up the country's coalbed-methane development, Sun's company was officially established in 1996.

The State Council has granted the firm the exclusive right to explore, develop and produce coalbed methane in co-operation with overseas companies.

The government has granted favorable policies to the Chinese company, including tax reductions, duty exemptions and the right to make decisions independently on investments and imports and exports.

It is estimated that China has between 30 trillion and 35 trillion cubic meters of coalbed-methane resources, located about 2,000 meters underground.

(China Daily July 17, 2004)