China is constructing the world’s only large-scale coal-to-gas industry as a strategic response to geopolitical supply risks, with capacity projected to expand significantly over the coming years. According to analysis from Rystad Energy, China’s coal-to-gas capacity stands at approximately 9.4 billion cubic meters annually as of the end of 2026, with expectations to reach 28 billion cubic meters per year by 2030. This expansion is formalized within China’s 15th Five-Year Plan covering 2026 to 2030, marking a transition from theoretical planning to active implementation of the technology.
Xinjiang province has become the primary hub for coal-to-gas development, benefiting from significantly lower coal costs compared to other regions. Mine-mouth coal prices in Xinjiang averaged approximately $30 per tonne between April 2025 and May 2026, substantially undercutting Inner Mongolia’s equivalent pricing. This cost advantage translates into competitive delivered gas prices ranging from $9.1 to $9.6 per million British thermal units, generally remaining below China’s average liquefied natural gas import prices. Existing facilities are operating at utilization rates exceeding 90 percent, demonstrating robust domestic demand and the competitive position of synthetic gas relative to imported alternatives.
China’s government is simultaneously pursuing energy security objectives while imposing environmental and carbon-related requirements on new projects. Recent developments such as CHN Energy’s Zhundong facility, scheduled to commence operations in 2027, incorporate carbon capture technologies and wastewater recycling systems. Approximately 20 billion cubic meters of coal-to-gas capacity is currently under development, with project approval processes accelerating in certain instances from multi-year timelines to under 12 months.
Significant challenges persist regarding water availability, environmental compliance, and carbon emissions management across northwestern China where facilities are concentrated. The long-term viability of decarbonized coal-to-gas projects and their bankability remain uncertain, and China has not yet established uniform decarbonization standards applicable nationwide to new coal-to-gas developments.
The expansion of China’s coal-to-gas capacity will likely influence global liquefied natural gas demand, pricing dynamics, and long-term supply contracts for major producers. While coal-to-gas remains supplemental to imports at projected 2030 levels, analysts note it represents a structural factor that liquefied natural gas exporters should incorporate into demand modeling.
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