Baring Private Equity Asia, a Hong Kong-based private equity group, yesterday announced its affiliate has, along with Chengwei Ventures LLC, invested $88 million in a Chinese producer of coalbed methane, China CBN Investment Holdings Ltd (CCBN).

Baring, which currently has $2.5 billion under management, will become the largest shareholder in CCBM.

The move is expected to help Baring gain from the increasing use of the energy in the country, analysts said.

Coalbed methane, or coal seam methane, is natural gas extracted from coal deposits. "The technology can remove gas with the potential of causing explosions in coal mines and produce a fuel much cleaner than coal," said Su Xiaoguang, an analyst at TX Investment Consulting Co Ltd.

There are around 260 trillion cu m of coalbed methane reserves in the world, double that of natural gas. Coalbed methane reserves in China rank third in the world, after Russia and Canada.

CCBM was formed from a management buyout of Asian American Gas Inc, one of the first foreign companies to engage in exploration, development and production of coalbed methane in China, said Baring.

Asian American Gas has previously cooperated with China United Coalbed Methane Corporation Ltd, a State-owned company, for coalbed methane exploration and development in Shanxi province, which is one of three areas with proven reserves approved by the Ministry of Land and Resources.