PetroChina China's top oil and gas firm, has set up a unit to develop alternative fuels to secure new energy sources amid high crude oil prices and dwindling domestic reserves, company officials said.

"The business will be extremely small. We will still highlight our main business, which has been keeping us very busy," spokesperson Cao Zhengyan said.

But high global crude prices and a growing shortage of oil and gas in the world's second-largest energy user have led Chinese state oil giants to look more closely at unconventional fuels.

PetroChina had quietly laid groundwork for coalbed methane (CMB), a gas extracted from coal mines, having sunk 200 exploration wells in northern China's Shanxi province this year, a second company official said.

PetroChina is aiming for commercial production before 2010, supplying 2-3 billion cubic metres of gas a year from fields mostly in Shanxi province.

The company has been working on the field in Shanxi for about a decade via a 50-percent-owned CMB specialist, China United Coalbed Methane Corp. Ltd., the second official said.

The new division, charged with project planning, would also work on biofuels, such as ethanol and biodiesel, which are derived from plants or grains.

Analysts have said Beijing would need to use incentives such as tax breaks to encourage these new energy sources.

China is already the world's third-largest producer of ethanol, increasingly used as a gasoline blend. But the main producers have been local firms, while state giants like PetroChina have so far played an insignificant role.

Source:佚名