In a ceremony in Lima, Peru's President Alejandro Toledo said he hoped the deal would be the first of many Chinese energy investments in Peru. "If this 40-year contract is a success, investments in Peru's southeastern jungle could reach $1 billion," Toledo said, flanked by Chinese officials.

The Peruvian government says the concession is for Block 111 in the southeastern Madre de Dios Region for a 3.7 million acre (1.5 million hectare) site.

Peru is home to the Camisea gas field in the southeastern jungle that Peru says will make it a net energy exporter from 2009. Brazil's Petrobras and Spain's Repsol-YPF are also exploring nearby.

The government said CNPC would explore via its Sapet Development Peru Inc. subsidiary, which has been pumping oil in northern Peru since the mid 1990s.

The deal is Peru's 16th energy contract signed this year, a record number that the government says shows the growing interest in exploring the country's energy reserves.

Geologists say southern Peru and neighboring Bolivia -- which has the second-biggest natural gas reserves in South America after Venezuela -- share similar characteristics, meaning more gas reserves could be waiting to be found.

China has been looking at energy-rich Latin America as it seeks to secure energy supplies outside its borders to feed voracious demand for its industrial expansion.