China Gas Holdings, which supplies piped gas to 58 mainland cities, will explore for coalbed gas in Wushenqi, Inner Mongolia, as it moves to ensure a stable supply of the clean fuel.
The privately owned utility signed an agreement with the Wushenqi municipal government on Tuesday, allowing it to explore for and distribute coalbed methane, the gas deposited in mine seams.
The 2,440 square km exploration field in the Nalinhe region is three times the size of Hong Kong.
Details such as the investment amount, time frame for setting up the project and output figures are subject to further negotiations.
China Gas shares were suspended from trading yesterday pending a statement about the deal. The stock was last traded at HK$3.52 per share on Tuesday.
Chief financial officer Eric Leung said preliminary estimates of the methane deposits at the site varied from 110 billion cubic metres to 300 billion cubic metres.