China Accelerates Coal-to-Gas Industry Amid Geopolitical Supply Risks

China is accelerating its coal-to-gas industry as a strategic response to geopolitical supply risks, according to a report by Rystad Energy. The country's 15th Five-Year Plan, which runs from 2026 to 2030, reinforces the role of coal-to-gas in domestic energy supply.

Rystad Energy estimates that China's coal-to-gas capacity will reach 9.4 billion cubic meters per year by the end of 2026 and grow to 28 billion cubic meters per year by 2030. This is equivalent to more than four times Austria's entire annual coal-produced gas demand.

The Xinjiang province has become the primary center for coal-to-gas expansion, benefiting from mine-mouth coal prices averaging 214 yuan, or $30 per tonne, between April 2025 and May 2026. This cost edge translates into delivered gas prices in East China of $9.1 to $9.6 per million British thermal units, generally below China's average liquefied natural gas import price.

The government is balancing support for coal-to-gas with project-specific carbon and environmental mandates. New developments are adapting, such as the CHN Energy Zhundong facility, a 2 billion cubic meters per year plant scheduled to start gas production in 2027, designed with electrolytic hydrogen integration, wastewater recycling, and planned carbon capture capacity of 550,000 tonnes per year.

Water availability, environmental compliance, and carbon emissions remain significant hurdles. China has not yet established a uniform nationwide decarbonization standard for new coal-to-gas projects. The growth of coal-to-gas capacity will have an increasingly significant impact on China's LNG demand, and consequently on global LNG prices and long-term supply contracts.