China’s Green Dragon Gas said its Greka unit has signed a farm out agreement with ConocoPhillips to develop wells at its Chinese coal bed methane production sharing contracts.

Under the terms, ConocoPhillips will make an initial payment of $20m to Greka and will also fund up to a total of $30m of the capital expenditure to develop wells at the Shizhuang South, Shizhuang North and Qinyuan blocks in China.

ConocoPhillips can elect to continue with a second phase of development and pay $120m to acquire 50% of Greka’s interest in three of its six Chinese CBM production sharing contracts, Green Dragon said.