War Heightens Energy Supply Fears... China Restarts Coal Gasification After 10 Years

Amid heightened concerns over energy supply instability due to the aftermath of the Iran war, it has been reported that China has resumed a coal gasification project that had been suspended for over a decade.

Construction site of the coal-to-gas conversion project in Liaoning Province, China. Liaoning Provincial Government website

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According to Yonhap News Agency, on the 20th (local time), Bloomberg reported that "Chinese state-owned energy corporation Datang Group resumed the Liaoning Fuxin coal gasification project in October last year."

This project, which began construction in 2011 in Fuxin city, northwestern Liaoning Province, involves an investment of 25 billion yuan and aims to produce 4 billion standard cubic meters (N㎥, at 0°C and 1 atm) of gas annually. However, due to a combination of logistics and technological challenges, environmental concerns, and unfavorable market conditions, construction was halted in 2014 and the project remained dormant for more than ten years.

Liaoning Daily reported that "more than 2,000 workers are currently on site," and stated that "production is expected to begin around the end of October." Initially, the plan is to supply gas through a dedicated pipeline to five cities within Liaoning Province, including Shenyang, Fuxin, and Tieling. Later, the pipeline will be connected to the national natural gas pipeline network, expanding supply to major regions such as Huabei (including Beijing, Tianjin, Hebei, and other northern areas).

The resumption of this long-delayed project is attributed to two main factors: an oversupply of coal and a surge in natural gas prices. China has sought to reduce its dependence on imported natural gas by utilizing cheap domestic coal, and this need has grown over the past ten years as global energy flows have been disrupted by protectionism and sanctions. Recently, the war in Iran has caused disruptions in exports from major natural gas producers in the Middle East, further intensifying this trend.

According to Oilchem, a Chinese petroleum industry consulting firm, there are currently 13 new coal gasification projects either under construction or in the planning stages in China. If all these projects are completed within five years, China's synthetic gas production will exceed 52 bcm annually-about seven times the current output-accounting for 12% of the country's total gas supply. Wang Haohao, an analyst at Oilchem, noted, "As profitability improves, investors are accelerating construction."

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