A Chinese group that includes major oil company Sinopec is in advanced talks to put up to $1 billion in a Texas clean-energy project, in what would mark one of the biggest investments by Chinese companies in the U.S. power sector.

China Petrochemical Corp., known as Sinopec, together with Chinese banks are in talks to acquire an equity stake in and provide financing to the roughly $2.5 billion Texas Clean Energy Project, said people familiar with negotiations.

Such a move would be significant for Sinopec, which is looking to build favor in the U.S. as it aggressively acquires energy reserves and seeks U.S. production expertise, currently through minority stakes and partnerships with Western companies.

The company under Chairman Fu Chengyu has already invested billions in U.S. shale-gas fields, for example.

The project has already secured $450 million in grants from the U.S. Department of Energy, in addition to tax benefits. It also has the necessary permits and contracts, including a contract with San Antonio to buy its electricity for 25 years.

At the same time, Chinese oil-industry officials remain wary that Chinese energy investment in the U.S. will be criticized, especially following a deal by Sinopec rival Cnooc Ltd. CEO -1.38%for Canada's Nexen Inc. NXY +0.23%that includes some Gulf of Mexico properties.

Sinopec could burnish its image through an investment in clean technology.The joint U.S.-China investment comes as Beijing and Washington have urged collaboration on clean-energy research and deployment.

Those efforts have been stunted by mistrust and continuing clean-energy trade disputes, including a U.S. anti-dumping case against solar-panel makers.

Sinopec has worked to present itself as the most internationally savvy of China's major oil companies.

"They want to be seen as a good guy," said a person familiar with negotiations.

An agreement between Sinopec and Seattle-based Summit Power Group LLC, the project's developer, could be announced as early as September, people familiar with the negotiations said.

But they cautioned that many of the details, including specific financial terms and the size of the equity stake, have yet to be decided.

The project would include a coal-gasification plant, which backers say will use coal more cleanly, and that would capture carbon dioxide for use in oil recovery.

While the U.S. has plentiful coal supplies, coal is a major source of greenhouse-gases emissions. Coal gasification is viewed as important to keeping coal in the energy mix. Developers say the plant will capture 90% of carbon dioxide otherwise emitted into the atmosphere.

Two other big coal-gasification projects are in construction in the U.S.—Southern Co.'s SO -0.38%Kemper project in Mississippi and Duke Energy Corp.'s DUK -0.03%Edwardsport plant in Indiana. Both have experienced rising costs that have made them controversial in their home states.

The Texas plant, located near Odessa, will convert coal into a combustible gas and use it to make electricity, much like a conventional gas-fired plant. In the process, it also will tease out chemicals for resale and carbon dioxide, which will be piped to the western Texas Permian Basin and used for enhanced oil recovery.

A person close to Sinopec said the company wants to learn from the project, and would use expertise gained in Texas to bolster enhanced oil-recovery efforts in China's large Shengli oil field in the eastern province of Shandong.

Chinese energy companies' ambitions in the U.S. have at times faced political resistance in Washington.

People involved in discussions said China's investment will be a "significant share" of the project's cost, consisting partly of debt and partly of equity.

Summit's ownership likely will decline from majority to minority, as other investors join in.

More investors are needed, and Summit is talking with potential participants in the U.S. and Europe, including some that might be eligible for export-bank financing from their own nations.

The plant will rely on equipment and technical expertise from companies in Germany and South Korea.

Siemens AG SIE.XE +0.16%is furnishing gasification and power-production equipment, and Selas Fluid Processing Corp., a unit of Munich-based Linde AG, is providing gas separators and other pieces of equipment to glean carbon dioxide, urea and other chemicals from the waste stream.

People with knowledge of the discussions said Summit is expected to carve out a role for Chinese investors but not one that would upset existing engineering and construction agreements.

Eric Redman, president of Summit, said his company is "working hard to complete financing" but he said he couldn't give details because it is "all covered by confidentiality agreements."

He said his company is talking "with many people in many countries" and hopes to have all the pieces of a financing package in place soon.