China's Coal-to-Gas Expansion Could Constrain Future LNG Demand

China is rapidly scaling up its coal-to-gas production in an effort to reduce dependence on liquefied natural gas (LNG) imports, a move that could constrain future demand for LNG and reshape competition among major exporters. According to Rystad Energy estimates, China's coal-to-gas capacity will reach 9.4 billion cubic meters per year by the end of 2026 and rise to 28 Bcm annually by 2030.

This expansion makes China the only country operating a large-scale CTG industry and gives Beijing another domestic source of gas that can serve as a buffer when LNG supply chains or pipeline routes are disrupted. As part of its energy security doctrine, China is investing in molecules it can produce, store, and move without reference to any foreign supplier.

The economics of coal-to-gas production are already supporting the expansion, with low-cost coal mines in Xinjiang averaging a price of about 214 yuan ($30) per tonne between April 2025 and May 2026. This translates into lower synthetic gas costs, allowing CTG produced in Xinjiang to reach eastern China at about $9.1, $9.6 per million British thermal units (MMBtu), generally below China's average LNG import price.