China is working on a policy to encourage the development and use of coal-bed methane, said an expert in Beijing Wednesday.

Qin Yong, a professor of China University of Mining and Technology, said at the ongoing Sixth China Coal Industry Science and Technology Conference that high risks of economic returns and high technological requirements are major factors preventing enterprises to invest in coal-bed gas development.

The Chinese government will enact a more favorable policy to encourage coal-bed gas development and use in the next five years from 2006 to 2010.

The policy, involving preferential taxation and compulsory gas use, is under discussion and will be issued soon, he said.

According to Qin, China's coal-bed gas industry is in the early stage of commercial development with only two coal mining corporations in Shanxi and Liaoning provinces being put into commercial operation.

However, the market is ready, he said.

The completion of the gas pipeline pumping gas from China's west to the east will greatly encourage the use of coal-bed methane in regions along the pipeline, said Qin.

According to official statistics, China boasts 31 trillion cubic meters of coal-bed methane with 16 trillion of good development prospects.

In 2005, China's investment in coal-bed gas development is about 600 million yuan (US$74.1 million).