Baring Private Equity Asia on Monday said it struck a deal to invest US$88 million in a Chinese producer of coalbed methane, seeking to capitalise on the country's growing use of the energy source.

China is keen to step up use of the gas to boost its energy security and cut a death toll from mining accidents that last year was close to 5,000.

Coalbed methane, or coal seam methane, is natural gas extracted from coal deposits. The technology produces a fuel which is much cleaner than coal and removes gas with the potential to cause explosions in coal mines.

The agreement allows Baring to be the largest shareholder in China CBM Investment Holdings Limited (CCBM). Chengwei Ventures LLC is also an investor in the deal.

CCBM, based in northern China's Shanxi province, was formed from a management buyout of Asian American Gas Inc, one of the first foreign companies to engage in the exploration, development and production of coalbed methane, Baring said in a news release. Asian American Gas previously had a partnership with a state-owned energy company.

Baring's acquisition of the stake is one of several deals in the last few months to focus on the gas, with exploration of coalbed methane on the upswing. Alternative energy deals in general have picked up speed in the last year, as oil prices remain at record highs.

China has coalbed methane reserves estimated at 36 trillion cubic metres, the world's third-largest after Russia and Canada. Large quantities of the gas are dispersed into the air, to avoid build-ups that can cause explosions.

A growing push toward coalbed methane from China and other parts of the world has spurred a wave of acquisitions in the sector.

Royal Dutch Shell in December bought a 55 percent stake in a Shanxi coalbed methane venture. Canada's Enmax Corp last month agreed to buy Cordero Energy Inc a producer of natural gas and coalbed methane.

China's use of coalbed methane gas was estimated to grow 13 percent in 2007 from a year earlier to 1.3 billion cubic metres (bcm), the National Development and Reform Commission, China's top economic planning agency, said in December.