China has agreed to buy unconventional gas sourced from coal seams from a A$35 billion venture owned by ConocoPhillips (COP) and Origin Energy Ltd. (ORG.AU), as the powerhouse Asian economy continues to diversify its energy supplies to fuels that burner cleaner than coal.

Under a preliminary agreement that is yet to become binding, China Petrochemical Corp, or Sinopec, will buy up to 4.3 million metric tons of liquefied natural gas from the project each year for 20 years and also buy 15% of the development, Conoco and Origin said in a joint statement, without disclosing a price.

The stake purchase would reduce Conoco and Origin's holdings in the Australia Pacific LNG project, slated to ship its first cargo in 2015, to 42.5% each and paves the way for the pair to officially sign-off on its first phase of construction this year.

International energy companies are spending billions of dollars developing giant natural gas terminals on Australia's coast to tap rising Asian demand. The island continent's vast gas reserves, stable regulatory regime and proximity to Asian buyers make it an attractive place to invest.

Four developments including Conoco and Origin's are planning to chill gas trapped in coal seams for export by tanker from the Queensland port of Gladstone.

While promising as an energy source, coal seam gas is also technically difficult to extract and untried on a major scale. LNG from coal seam gas also has a lower energy content than output from conventional natural gas supplies.

A rival venture by BG Group PLC (BG.LN) last year agreed to sell LNG from coal seam gas to China National Offshore Oil Corp. and Royal Dutch Shell PLC (RDSB.LN) sold 50% of its Gladstone venture to PetroChina.

China has previously agreed to buy LNG from conventional natural gas projects on Australia's west coast and is currently a customer of the operational North West Shelf joint venture.

A price on the stake sale to Sinopec won't be released until the heads of agreement becomes binding, an Origin spokeswoman said.

Australia's Santos Ltd. (STO.AU) in December agreed to sell a 15% slice of its LNG joint venture at Gladstone to Korea Gas Corp. (036460.SE) and France's Total S.A. (TOT) for A$665 million.

Investors were concerned the pair wouldn't be able to find customers in time, given that some rivals have already secured buyers amid fears construction of close to a dozen LNG project in the region will generate a supply glut.

The Sinopec deal to buy up to 4.3 million metric tons a year of LNG will underpin the first of APLNG's two foundation LNG processing units estimated to have a combined production capacity of 9 million metric tons.

The Origin spokeswoman said offtake discussions with other potential LNG buyers continue.

Conoco Chief Executive Jim Mulva said the joint venture "expects to rapidly bring the project to sanction" while Sinopec President Su Shulin said the deal will help the company "diversify its natural gas supply and meet the rapidly increasing demand of customers in China".

In a move to prevent delays to the project, Origin said Thursday that it will allow Conoco to defer a $1 billion milestone payment tied to the venture.

The move comes as Conoco continues to overhaul its global oil and natural-gas assets to pay down debt and improve shareholder returns after a series of major acquisitions prior to the financial crisis left it short of cash. Over the past year, it has raised billions of dollars selling stakes in Russian oil producer Lukoil Holdings (LKOH.RS) and the Syncrude oil sands project in Canada.

Origin said the deferral was necessary to "help progress a final investment decision in the near term", even though it could leave an immediate $1 billion hole in its balance sheet.

The payment from Conoco could instead be made when the project pays out an agreed economic return, Origin said, without elaborating.

Shares in the Sydney-based integrated energy company jumped 5.8% to A$16.83 on Friday.

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