Carbon Energy is a step closer to commercialising its underground coal gasification technology that's banned from being used in its home state of Queensland.
The listed energy company says its partnership with Chinese energy player Beijing JinHong Investment has reached a key milestone, with Chinese regulators registering the joint venture.
"The JV is the foundation of Carbon Energy's strategy to commercialise its UCG technology globally with a particular focus on the China market," Carbon Energy said in a statement.
"The vast Chinese market is a logical target for Carbon Energy as China is estimated to consume approximately half of global coal consumption."
Under the agreement, JinHong will contribute $US30 million ($A40.71 million) towards the development of a commercial demonstration project.
UCG turns coal reserves too deep to be mined in traditional methods into gas, which is then piped to the surface.
The Queensland government banned UCG activities in April following a number of pilot projects, citing potential environmental impacts as outweighing foreseeable benefits.
Carbon's rival Linc Energy went into liquidation in May after it was committed to stand trial, accused of wilfully and unlawfully causing serious environmental harm at its Hopeland pilot UCG plant, about 300 kilometres west of Brisbane.
Carbon Energy shares were up 0.6 cents, or 67 per cent, at 1.5 cents at 1430 AEST.
