China's largest coal producer, China Shenhua Group, has launched a project to research and develop combustible ice, a kind of natural gas hydrate, in the northwestern Qinghai province.

Shenhua Group signed an agreement with the Qinghai provincial government on Monday evening to start the exploration of combustible ice in the province.

Combustible ice usually exists in seabed or tundra areas (two mediums having the strong pressure and low temperature necessary to its stability). It can be lit up like solid ethanol, which is why it has the name "combustible ice."

As a kind of clean energy, combustible ice is regarded as a potential alternative to coal and oil.

China announced the first discovery of the resource under the bed of the South China Sea in May 2007. After it was discovered in Muli prefecture in Qinghai province in 2009, the Ministry of Land Resources announced that China had found combustible ice in the land-based region as well.

Experts expect China to experience a period of peak energy demand from 2020 to 2025. With further exploration, the country's prospective volume of natural gas hydrate in frozen earth regions is estimated to reach an equivalent to 35 billion tonnes of oil.