OREANDA-NEWS. February 07, 2014. China is targeting to raise its synthetic coal-to-gas output to 50 billion cubic meters by 2020, accounting for over 12% of domestic supply, an official with the National Energy Administration said.

But actual output may fall short of the government's target, as not all of the planned coal-to-gas projects may come onstream, according to a report released the same day by state-owned China National Petroleum Corp.'s Economics and Technology Research Institute.

Yang Lei, deputy director of the Department of Oil and Gas at the NEA under the National Development and Reform Commission, said coal-to-gas output is targeted to hit 50 billion cu m by 2020, echoing statements made earlier this week by Wu Xinxiong, NDRC's deputy director as well as head of the NEA.

"According to our initial plan, the output of coal-to-gas will reach 50 billion cu m by 2020, accounting for about 12.5% of domestic gas supply," Wu was quoted as saying in the National Business Daily newspaper.

China saw the inauguration of its first two large-scale coal-to-gas projects in northwestern China last month.

They are: private firm Xinjiang Qinghua Group's 5.5 billion cu m/year project in Yili, Xinjiang province, and Datang International Power Generation's 4 billion cu m/year Keqi project in Inner Mongolia.

CNPC expects the country's coal-to-gas production to make significant inroads this year, exceeding 2 billion cu m.

The country has been encouraging greater utilization of abundant coal resources stranded in remote areas, such as converting coal to the higher value products of natural gas and chemicals, with analysts previously estimating that output of synthetic coal gas will outstrip coalbed methane in the long term.

As a sign of this, the central government has approved 15 coal-to-gas projects in just 2013 alone, with the aim to boost natural gas supply to meet China's fast-rising demand, according to analysts.

This brings the country's total capacity of planned and operational coal-to-gas plants to 81.1 billion cu m/year.

Still, CNPC expects China's coal-to-gas production to reach just 20 billion-30 billion cu m/year by 2020 -- falling below the government's target -- because of various constraints.

"Only a few of those coal-to-gas projects approved by the government are likely to come on stream during 2017 to 2018, due to the severe environmental protection problems and lack of pipeline networks. The output in 2020 is expected to reach 20 billion-30 billion cu m/year," the report said.

Meanwhile, China's three major state-owned oil and gas entities -- CNPC, China Petrochemical Corp., or Sinopec, and China National Offshore Oil Corp. -- have also jumped into the coal gasification business, either through direct investments or as buyers.

Sinopec is developing an 8 billion cu m/year coal-to-gas project in Xinjiang's Changji. The project, which has received NDRC approval in September 2013, is expected to start production in 2017.

So far, Sinopec has started initial work to build the 30 billion cu m/year Xin-Zhe-Yue pipeline linking synthetic gas produced in Xinjiang to consumer bases in China's southern and eastern provinces.

The 7,927-km pipeline, which was approved by the NDRC last July, will traverse across 13 provinces including Xinjiang, Gansu, Zhejiang, Guangdong and Guangxi.

Sinopec is also planning to build another pipeline, namely the 4,463-km Xin-Lu pipeline, to send synthetic gas to Henan, Shandong, Hebei, Beijing, Tianjin, Anhui and Jiangsu regions.

CNOOC plans to jointly build a 4 billion cu m/year coal-to-gas project in Datong, northwestern Shanxi province, with Datong Coal Mine Group. It has also received NDRC approval to build its own 4 billion cu m/year coal-to-gas plant in Erdos, northwest Inner Mongolia.

As for CNPC, the company is the sole buyer of gas produced from the two new coal-to-gas plants.

CNPC is transmitting gas offtake from Xinjiang Qinghua Group's Yili plant through its Yining-Horgos pipeline, which is a branch line of the West-East Pipeline III. The gas it lifts from Datang International Power Generation's Keqi plant is supplied to Beijing.

Meanwhile, the progress of major independent power producer Datang's Fuxin coal-to-gas project in northeastern Liaoning province has been delayed as approval processes are still ongoing, a company spokesman said.

The first phase of the 4 billion cu m/year project was to have started operations by the end of last year.

To date, Datang has already constructed dedicated pipelines for the gas, which will be sold directly to local gas distribution companies for residential use.