China, the world's second-biggest energy consumer, plans to spend 800 million yuan (US$100 million) over the next 10 years to study next-generation fuel, called natural gas hydrates, that could possibly ease the nation's increasing reliance on oil imports in the long run.

The country expects technology to be viable between 2010 and 2015 for the trial exploration of the new energy source, a crystalline compound of water and natural gas with methane as its major ingredient, said an industry report posted on the National Development and Reform Commission (NDRC) website.

"But further technical breakthroughs need to be made before the fuel can be commercially developed," said a report published on Monday.

When lit, every cubic metre of gas hydrates, commonly known as "fire in ice," is capable of releasing as much energy as 160 to 180 cubic metres of natural gas.

Optimists say gas hydrates could reliably replace the conventional oil and coal, thanks to its abundant deposits under the sea.

They believe that the world's gas hydrates reserves are equivalent to as much as twice the combined amount of coal, oil and natural gas, sufficient to meet global energy demands for a thousand years.

China began preliminary research into gas hydrates in 1999, and plans to work with its German counterparts to sample the fuel in the northern part of the South China Sea within the year.

"China so far has discovered enormous reserves of gas hydrates in the offshore areas only those spotted in the northern part of the South China Sea are expected to amount to half the oil resources on the land," the NDRC report said.

China had recoverable oil reserves of as much as 21.2 billion tons last September, according to figures from the Ministry of Land and Resources.

Impressive as it may sound, some experts are not so enthusiastic, saying the new energy source would not be available for everyday use until far into the future.

"Like hydrogen technology, the gas hydrates development is still at a very nascent stage, and we need to do a lot more work to get it onto the ground," said Ni Weidou, chairman of the Tsinghua-BP Clean Energy Research and Education Centre. "Meanwhile, we cannot rule out the possibility of finding another source which is competitive with gas hydrates in the future."

Ni said coal-to-fuel technologies would be the most feasible to address concerns over the price of oil and dirty coal, citing China's rich coal resources.

"As oil prices are not expected to fall below US$50 per barrel, coal-converted fuels such as methanol and other oil products will be major alternatives to ease China's heavy reliance on oil," Ni said.

A growing number of energy firms have shown strong enthusiasm for coal-to-fuel projects in China to cash in on the government's willingness to boost the development of oil alternatives.

The nation's biggest coal company China Shenhua Group has teamed up with global technology leaders such as Royal Dutch Shell and South Africa-based Sasol on the joint study of coal-to-liquids projects in China, which aims to convert coal into 30 million tons of oil by 2020.

Its smaller rival China National Coal Group Corp has also announced a partnership with four other energy firms including Sinopec to build a 21-billion-yuan (US$2.6-billion) project in North China to turn coal into methanol, a blending component for petrol, and dimethyl ether, a clean fuel that can replace liquefied petroleum gas and diesel.

To avoid excessive investment boosted by the industry boom, Ni said the government should come up with more regulations and standards on the construction of coal-to-fuel projects in China.

The NDRC earlier last month issued an industry notice to tighten controls on such project building, and its Vice-Minister Zhang Guobao said companies should remain rational in developing more plants.

"The coal-to-fuel technology is a good way (for China) to handle the high oil prices, but we should develop it with good awareness of environmental protection and economic returns," Zhang said last week in Beijing.