Key facts
- China's coal-to-gas (CTG) capacity is expected to reach 28 billion cubic meters per year by 2030.
- Xinjiang province is the leading region for CTG expansion due to cost advantages.
- CTG gas prices in East China are generally below average LNG import prices.
- New CTG projects are incorporating carbon capture and electrolytic hydrogen integration.
- Water availability and carbon emissions are identified as significant challenges for CTG development.
China is significantly expanding its coal-to-gas (CTG) industry, aiming to triple its capacity by 2030 to bolster energy security and reduce reliance on imported liquefied natural gas (LNG). Rystad Energy forecasts this capacity to reach 28 billion cubic meters (Bcm) annually by 2030, a strategic move driven by geopolitical concerns affecting global LNG supply chains.
The Xinjiang province has become the focal point for CTG development due to its low coal prices, averaging around $30 per tonne. This cost advantage allows CTG gas to be delivered to East China at prices between $9.1 and $9.6 per million British thermal units (MMBtu), which is generally lower than the cost of imported LNG. Existing CTG plants are operating at high utilization rates, exceeding 90%, indicating strong demand and cost-competitiveness.
Approximately 20 Bcm of new CTG capacity is currently under development, with project approval timelines in Xinjiang notably compressing to under 12 months. New projects, such as the CHN Energy Zhundong development, are being designed with integrated features like electrolytic hydrogen and carbon capture technologies to address environmental concerns.
Despite these advancements, challenges persist, including water availability, environmental compliance, and the scalability of carbon capture utilization and storage (CCUS) projects. The long-term bankability of decarbonized CTG remains an open question, but the immediate global security imperative is driving investment. The increasing CTG output is expected to have a material impact on China's LNG demand and, consequently, on global LNG prices and supply contracts.