Amidst escalating geopolitical tensions and global efforts to reduce reliance on energy imports, a major Asian nation is building a globally unique large-scale coal-to-gas industry to hedge against the risk of disruptions to the external natural gas supply chain. This formally integrates coal-to-gas into its domestic energy supply system, with production capacity projected to nearly triple from 9.4 billion cubic meters this year to 28 billion cubic meters by 2030. According to Rystad Energy's calculations, the country's coal-to-gas production capacity will experience rapid growth. However, alongside this industrial expansion, real challenges such as carbon emissions and water resources cannot be ignored. This industry will also indirectly reshape the global liquefied natural gas (LNG) trade landscape.

The coal-to-gas industry is expanding rapidly, with some regions becoming core hubs.

Eric, Vice President of Natural Gas and LNG Markets at ResEnergie, stated, “The development of coal-to-gas projects by the country is a direct reflection of its energy security strategy. Given the current global LNG supply chain and pipeline transportation routes being increasingly disrupted by geopolitical factors, the country has chosen to invest in and build gas sources that can be produced, stored, and transported independently, no longer relying entirely on overseas suppliers.” Some regions of the country have become major hubs for coal-to-gas projects due to their low pithead coal prices. From April 2025 to May 2026, the local cost advantage will be passed on to end-user gas prices, which will generally be lower than the average import price of LNG. Existing facilities are operating at over 90% capacity, fully demonstrating the market competitiveness of domestically produced syngas. Currently, approximately 20 billion cubic meters of annual coal-to-gas production capacity in China is under construction, with approval cycles for some projects significantly shortened, further accelerating the pace of industrial development.

The dual constraints of safe development and low-carbon environmental protection coexist.

While promoting coal-to-gas to ensure energy security, the country also sets strict constraints on carbon emissions and environmental protection for projects, driving the industry towards a low-carbon transformation. For example, a certain project in the country is a typical example; this 2 billion cubic meter per year plant is planned to be put into operation in 2027, integrating electrolytic hydrogen production, wastewater recycling, and large-scale carbon capture facilities. Becker, an analyst at ResEnergy's Carbon Capture, Utilization and Storage (CCUS), said: "The market size of permanent carbon sequestration projects based on geological storage in major Asian countries is still limited, but the carbon capture market based on carbon utilization has taken shape and has mature downstream application scenarios. The key is whether the industry can achieve large-scale expansion. Whether low-carbon coal-to-gas projects can be commercially viable in the long term remains uncertain, but the current global demand for energy security is reducing market hesitancy." Water scarcity, environmental regulations, and carbon emission pressures remain real obstacles to the industry, and a unified national standard for reducing carbon emissions in newly built coal-to-gas projects has not yet been implemented. High upfront investment in large-scale projects will exacerbate water resource pressures, and if captured carbon dioxide is geologically stored, it will also compress the commercialization space of carbon capture.

Conclusion

In summary, coal-to-gas is positioned as a supplementary gas source and cannot completely replace natural gas imports. As production capacity continues to expand, it will structurally suppress the country's demand for liquefied natural gas (LNG), a variable that exporting countries such as Australia, Qatar, and the United States need to pay attention to. The future development of this industry depends on how well it balances energy security, water resource constraints, and carbon reduction goals.