China National Offshore Oil Corporation (CNOOC) has signed a contract with China United Coalbed Methane Corporation (CUCMC) to spend $1.56bn in coal bed methane exploration in China.
The 30-year agreement will see the two companies explore, develop and produce methane gas over a 10,866m² area covering Shanxi, Shaanxi, Anhui, Shandong, Yunnan, Ningxia, Hebei, Hubei and Henan provinces over the next five years.
CUCMC and CNOOC will both share future coal bed methane production from the project.
The company will be responsible for 70% of the future development and production costs of a coal bed methane field while CUCMC will take up 30%.
Internal resources will be used to fund the coal bed methane project, according to CNOOC, which has invested a total of CNY35.8bn ($5.61bn) per year over the past five years.
The deal allows CUCMC to develop and increase its clean energy business and work onshore in China.
CNOOC signed an agreement to acquire Canadian oil producer Nexen for $15.1bn in July, which was its largest overseas acquisition.
China intends to increase the share of natural gas in its energy mix by 2015 in a bid to reduce greenhouse gas emissions by doing away with generation of power through coal.