The International Finance Corp.(IFC) said on Tuesday that it has signed a financing agreement to support the development of China's coalbed methane resources, a cleaner, safer, and more efficient energy source than coal.

    IFC's 15 million dollar equity investment in Far East Energy Corporation will help fund the exploration and develop over 5,000 square kilometers of deposits in the Shanxi and Yunnan provinces in central and southeastern China, said a statement released by IFC, a member of the World Bank Group.

    Coalbed methane, a gas found in coal deposits, is extracted using no conventional methods and state-of-the-art drilling technology. It has significant environmental and health benefits compared to other fossil fuels due to lower emissions of carbon dioxide and toxic pollutants.

    "Given China's significant coalbed methane resources, this investment has the potential to help the country meet its growing energy needs by using domestic resources in an environmentally conscious manner," said Somit Varma, IFC Director for Oil, Gas, Mining, and Chemicals.

    "We are excited to partner with Far East Energy, a company that has excellent management and the technical expertise needed to develop this unconventional energy source," he said.

    China is estimated to have the world's third-largest coalbed methane resources, which will play an important role in the country's plan to become a low-carbon economy, said IFC.

    U.S.-based Far East Energy Corporation is the third-largest concession holder of coalbed methane deposits in China. The company will develop the resources together with its local joint-venture partner, the state-owned China United Coalbed Methane Company, Ltd.

    As an equity investor in Far East Energy Corporation, IFC will help the company develop best practices in local community engagement and a long-term strategy to leverage potential carbon finance opportunities under the Kyoto Protocol, the UN framework that seeks to reduce global greenhouse gas emissions.

    IFC will also provide guidance on environmental standards. Far East Energy Corporation will use IFC's funds for its exploration program and the completion of a feasibility study as well as social and environmental impact assessments. IFC is also considering participating in the project's long-term financing when it proceeds to commercial development.

    "We are proud to be the first coalbed methane company in China to receive IFC funds, and we consider this to be a strong vote of confidence in our projects," said Michael R. McElwrath, CEO and President of Far East Energy.

    "This investment from one of the premier financial institutions in the world will allow us to accelerate our explorations in the Shanxi province, as well as in our other holdings in the country," he added.