China plans to more than double its coal-bed methane output by 2015 by boosting incentives.

The nation aims to increase annual production to 21 billion cubic meters by 2015 from 8.6 billion cubic meters last year, the country's No. 2 oil and gas producer Sinopec said in a newsletter yesterday, citing a government five-year plan in the making.

Coal-bed methane is a type of natural gas extracted from coal beds. Development in the sector has been sluggish in the past five years due to monopoly, a low investment return and the difficulties in clarifying exploration rights. Coal exploration is usually subject to provincial government approval while gas is handled by the Ministry of Land and Resources.

The 2010 output fell short of the government target of 10 billion cubic meters.

The government plans to double the coal-bed gas production subsidy to 0.40 yuan (6 US cents) per cubic meter and increase the subsidy to 0.35 yuan per kilowatt-hour from 0.25 yuan for power generated by coal-bed methane, Sinopec said. China also plans to set up a risk fund for the exploration of the fuel, it said.

China is tapping unconventional gas resources, including shale gas and tight gas, as part of a long-term strategy to help cut reliance on oil and coal.

"The success or failure of shale gas, coal-bed methane and tight gas in China will impact the size of gas import requirements over the coming decade," Sanford C. Bernstein & Co analyst Neil Beveridge said last week, adding there should be room to accommodate different sources of gas given robust demand.

Coal-bed methane, shale gas and tight gas output may eventually account for 30 percent of the nation's total gas output, Jie Mingxun, head of PetroChina's coal-bed methane unit, said last year.