The countrys biggest oil and gas producer, state-owned China National Petroleum Corp (CNPC), is building the 35-km pipeline, which will be capable of carrying three billion cubic metres of CBM each year.
The pipeline will link Qinshui Basin in north Chinas Shaanxi province with the country's east-west natural gas pipeline.
Though CNPC did not reveal the cost of the project or the date of its completion, the company will make use use of the CBM in a more economic way, state-run Xinhua news agency said.
"The project will make use of CBM in a more economic way and supplement sources for the west-east gas pipeline and ease the gas supply strain," the company said.
CNPC's move assumes significance as the natural gas supply in the country is expected to fall short of demands by at least 60 billion cubic metres by 2020.
China's CBM reserves are estimated at 30 trillion cubic metres. Russia and Canada hold the largest reserves.
However, mining industry in China is considered the deadliest profession in the world for its high rate of accidents, which claimed about 3,800 lives last year.
Deadly mine explosions are often caused by methane in coal beds, prompting the government to encourage utilising gas as fuel or for power generation and chemical production since the 1990s.
