China Petrochemical Corp, the nation's second-largest oil and gas producer, is seeking to commercialise geothermal energy after spending about 1 billion yuan (HK$1.26 billion) in the past few years to develop more than 10 pilot projects on the mainland. Zhou Zongying, a researcher at Sinopec Star Petroleum - China Petrochemical's geothermal energy development arm - said the renewable energy had good potential to partially replace coal-fired heat and electricity generation in big cities. China Petrochemical is the parent firm of China Petroleum & Chemical Corp. "So far, geothermal energy's development has been limited by the high initial investment required, but as more local governments are imposing restrictions on coal-fired heat and power generation, geothermal energy will have more room for development," Zhou said at the sidelines of the China Mining conference. Since July, Beijing has implemented tougher emission reduction requirements on coal-fired power plants that are similar to those in developed nations. Local governments, under pressure to combat choking air pollution, have set ambitious plans to phase out coal-fired heating boilers. While natural gas is the main replacement fuel, limited supply meant only a limited number of coal-fired boilers could be replaced in the short to medium term. Geothermal energy coming from the Earth's crust is expensive to develop, but Zhou said projects in locations with good resources were modestly profitable. Wells are drilled and the heat is carried upwards by piped water flowing through heat exchangers. Shallow wells run less than 200 metres deep, while deep ones are up to 3,000 metres. The best geothermal resources are found in Tibet, Yunnan and Sichuan provinces, where temperatures could reach 250 degrees Celsius, while eastern and southern coastal regions are shallow and temperatures are lower. "Some projects can have their investment recouped within seven to eight years," Zhou said, adding the smallest projects involved at least 150,000 sq metres of heating area and required investment of "tens of millions of yuan". Sinopec Star had spent about 1 billion yuan on more than 10 projects in Hebei, Shandong, Henan and Shaanxi provinces, Zhou told the South China Morning Post . Sinopec Star was designated by the National Energy Administration to lead the nation's geothermal energy commercialisation. According to its website, at the end of 2010 it had projects with a heating area of more than 3 million sq metres, over 40 drilled wells and more than 20 heat exchange stations. The company last year set up the National Centre for Geothermal Energy Research and Application Technology Promotion. In 2006, it formed a venture with Iceland's Orka Energy to harness geothermal energy for heating and electricity production. Last year, Beijing set targets for geothermal energy to provide 500 million sq metres of floor area of heating projects by the end of next year, and 100MW of annual power generation capacity.