The proportion of coal consumption is decreasing, while natural gas consumption is rising. China's fossil energy structure is characterized by abundant coal but relatively scarce oil and natural gas. Given natural gas's clean and eco-friendly attributes, it has been vigorously promoted by the state in recent years, with demand growing daily. According to the Energy Development 13th Five-Year Plan, coal's share in primary energy consumption will decline from 64% in 2015 to about 58%. Conversely, natural gas's proportion will increase from 5.9% in 2015 to 10%.
Statistical Analysis of Natural Gas Production and Sales
By the end of August 2018, the cumulative apparent consumption of natural gas reached 180.4 billion cubic meters, marking an 18.2% year-on-year increase. In August alone, natural gas output stood at 12.9 billion cubic meters, up 9.7% year-on-year. From January to August 2018, national natural gas production totaled 103.39 billion cubic meters, reflecting a 5.9% growth.A clear disparity emerges when comparing these figures: domestic production growth significantly lags behind consumption demand. Against this backdrop, coal-to-natural gas—a production process that converts coal into synthetic natural gas—has gained rapid traction from both government and enterprises. It has now become a critical component in China's strategic transformation of its energy consumption mix.
Rapid Development of the Coal-to-Gas Industry
Since 2012, when the government began strategically supporting the coal-to-natural gas (CTG) sector, China's CTG industry has achieved rapid growth. According to the Market Prospects and Investment Strategy Planning Analysis Report on the Coal-to-Natural Gas Industry published by the Qianzhan Industry Research Institute, over 50 CTG projects are currently in operation, under construction, or in the planning phase. By the end of September 2018, China's CTG production capacity reached 5.105 billion cubic meters, marking a 64.4% increase since the start of the 13th Five-Year Plan period (2016-2020).Should all these projects be brought into operation, total capacity would exceed 200 billion cubic meters annually. CTG not only contributes significantly to winter heating supply but also, in the long term, substantially reduces China's dependence on imported natural gas—a strategic imperative for safeguarding national energy security. It is projected that by 2020, CTG could replace 30–40 billion cubic meters of conventional natural gas, thereby reducing external dependence by 10 to 13.3 percentage points. Currently, China's external dependence on natural gas approaches 40%.
Policy Support for the Coal-to-Gas Industry Urgently Needed, with Steady Growth Expected Ahead
Notably, as a clean energy sector, coal-to-natural gas (CTG) significantly enhances coal resource utilization and boosts coal's value. With technological advancements, CTG projects have markedly reduced their impact on regional water resources. For example, the Inner Mongolia Huineng CTG project achieves a methane content of 97% in its synthetic natural gas, consuming only approximately 2.2 tons of coal and under 7 metric tons of water per 1,000 cubic meters of gas output, both metrics surpassing initial design targets.Despite rapid enterprise growth, CTG still accounts for less than 1% of China's natural gas market share. Moreover, its dependence on pipelines owned by China's three major state-owned oil giants ("三桶油") leaves CTG producers vulnerable to pricing constraints, resulting in poor profitability. To escape this loss-making cycle, stakeholders widely appeal for national policy support, emphasizing CTG's strategic role in energy security. Given its shorter process flows and higher thermal conversion efficiency, CTG remains an ideal pathway for domestic gas supply. With sustained efforts, the sector is poised for increasingly robust development.
