By Wang Yu (China Daily)
Updated: 2007-10-27 13:58

China's leading coalbed methane developer signed a production-sharing contract with a US energy company on Friday, to extract more of the clean energy resource.

China United Coalbed Methane Co Ltd (CUCBM) and Pacific Asia Petroleum Ltd, a subsidiary of Pacific Asia Petroleum Inc, agreed to jointly exploit coalbed methane resources in Shanxi Province.

The deal involves a 708-sq-km block known as Zijinshan. The block is located in the Ordos basin, the second largest oil-bearing basin and the most prolific gas reserve in China.

"This venture, together with other projects that we are finalizing, would make Pacific Asia Petroleum Inc one of the largest foreign holders of coalbed methane and tight gas sand properties in China," said Frank C. Ingriselli, president of Pacific Asia Petroleum.

Potential gross gas resources from the ventures will exceed 10 trillion cubic feet (tcf).

Sun Maoyuan, president of CUCBM, said: "We look forward to working with Pacific Asia Petroleum to jointly develop China's coalbed methane reserves - an important part of China's energy and environmental development plans."

CUCBM estimated the Zijinshan block has potential gross gas reserves in excess of 3.8 tcf.

The block is close to the west-east gas pipeline, which transports gas reserves from China's energy-rich western area to the Yangtze River Delta region. Gas extracted from the block will be easily transported to end-users as it can be piped to the eastern part of China, analysts said.