CNOOC New Energy Investment Co Ltd, a wholly owned subsidiary of China National Offshore Oil Corp (CNOOC), and Datong Coal Mine Group will invest 30 billion yuan in a coal-to-gas project in Datong, Shanxi province.

CNOOC, China's top offshore oil and gas producer, said the investment would go towards building the coal-to-gas plant with an annual capacity of 4 billion cu m of natural gas, and construction of supporting projects including two coal mines each with an annual output of 10 million tons, relevant coal washing mills and coal gangue-fired power plants.

Apart from natural gas, the plant will also produce diesel, gasoline and other chemical products, the company added.

It is estimated that the coal-based clean energy project will pull in roughly 26 billion yuan in sales for CNOOC and Datong combined.

But, the company has not disclosed a detailed timetable for the construction and operation of the plant.

The project aims to tap Datong's vast coal reserves and increase the supply of clean and reliable natural gas to Shanxi province and the Bohai Bay Rim area, which covers regions such as Shandong, Liaoning, Hebei and Tianjin, China's engines of growth.

The company said the project would also boost the energy structure in those regions, as more clean energy would be supplied.

Zhou Shouwei, vice-general manager of CNOOC, said the project could be regarded as a large-scale strategic cooperation between the oil and gas, and coal industries.

Zhou said there was a gap of primary energy efficiency between China and developed countries, and the development of coal-based clean energy was a very effective way to improve the country's primary energy efficiency.

Coal accounts for over 70 percent of China's primary energy production and consumption. The country's use of the fuel will likely touch 2.9 billion tons by 2020.

Coal-firing-related emissions constitute 80 percent of China's annual sulfur dioxide (SO2) emissions and 70 percent of its carbon dioxide (CO2) emissions.

As one of the most advanced ways of clean coal utilization, the coal-to-gas project will also lead to energy savings, and a clean, highly-efficient and low emission environment.

"The world is going through a financial crisis, but this is the best time to reform and improve the industrial structure,"Zhou said.

This project, he said, would be a win-win deal for both oil and gas enterprises and coal firms.

Nobuo Tanaka, executive head of the International Energy Agency (IEA), had said earlier that China's role in developing new clean coal technologies was critical as the speed and scale of China's expanding coal use has brought in a new urgency to deploying the full range of clean coal technologies.

The 11th Five-Year Plan (2006-10) for Coal Industry Development in China requires that the coal industry strengthen reforms in its industrial structure, take a sustainable path with high utilization rates, and reduce its environmental impact.

Premier Wen Jiabao has also asked for rapid industrialization of clean coal technologies and strengthening comprehensive utilization of resources, in the government work report speech he delivered at the opening of the second session of the 11th National People's Congress on March 4.

In addition, in the Chinese government plan to revitalize 10 key industries, it has vowed to curb blind development of coal chemical processing and suspend approval of projects that only aim to expand production capacity without regard to environmental impact.

Last year, the central government suspended all coal-to-oil projects. And, two coal-to-fuel projects, which have seen investments by Shenhua Group, China's largest coal producer, is still in a trial phase.