China Gas managing director Liu Ming Hui told reporters at the sidelines of the fifth Asia Gas Partnership Summit that his company was holding talks with the two companies.

"GAIL is one of our important shareholders, and Arrow has experience [in CSM]," Dow Jones newswires quoted Liu as saying. "So we would like to partner with them."

Arrow had in March this year executed an agreement with Xinjiang Autonomous Region (XAR) Government in China to assess and evaluate the potential of the region's extensive coal seam methane potential.

It also signed an 80:20 joint venture agreement with Urumqi Geological and Exploration Development Company of Xinjiang Geological Survey that will focus on identifying opportunities where CSM can be commercially exploited prior to coal mining operations.