BEIJING (Reuters) - A Canadian firm will cooperate with a Chinese company to exploit coalbed methane reserves in southern China, in a move that could help boost domestic energy supplies, the China Daily said on Wednesday.

A production-sharing contract signed between AsiaCanada Energy Inc. and China United Coalbed Methane Corp. Ltd. would allow for joint exploitation in an area estimated to contain around 160 billion cubic metres of coalbed methane, the official paper said.

No dollar figure for the contract was provided, but the paper said AsiaCanada Energy's share of production would be in proportion to its investment.

The Canadian firm would shoulder risks and lay out funds over a four-year exploration period, it said.

The contact was the 22nd such deal signed between China United Coalbed Methane Corp. and a foreign company, the paper cited the Chinese company's president, Sun Maoyuan, as saying.

China hopes the development of coalbed methane, which can be used to generate power or as a raw material for chemicals, will help boost tight energy supplies in one of the world's fastest growing major economies.

China had between 30 trillion and 35 trillion cubic metres of coalbed methane, located no deeper than about 2,000 metres (6,600 feet), the paper said.