China May Be at a Crossroads on the Future of Its Ambitious Coal Gasification Program

It was first criticized by environmentalists.  Then it was reined in by government officials.  Now, China's coal-fueled synthetic natural gas industry faces another blow as a group of energy experts raise doubt over its economic viability.

In a meeting recently hosted in Beijing, researchers from Chinese and Western think tanks opened fire on a long list of business risks in China's synthetic natural gas industry, including reliance on immature technologies and their rising environmental costs and dim market prospects.  If more projects are launched, the researchers asserted, it could put a dent in the nation's financial projections.

Coal-based synthetic natural gas -- a product of converting coal to natural gas through a gasification process -- barely existed in China until 2013.  However, as the country's demand for cleaner fuels soared last year, in line with mounting pressure to clean up air, the development of Chinese coal-to-natural-gas projects accelerated.

According to a 2014 study from Greenpeace, China currently operates two coal-to-natural-gas demonstration projects, but there are 48 other plants under construction or in planning.  Once completed by 2020, those plants will produce 225 billion cubic meters of coal-fueled synthetic natural gas annually.

That could provide a quick fix for China's smog-choked east, potentially replacing fuels from coal-fired power plants and petroleum-driven automobiles.  But it could also create an environmental nightmare.

Greenpeace calculates that if all the Chinese coal-to-natural-gas plants currently in the pipeline are built as planned, they will emit more than 1 billion tons of carbon dioxide each year, equivalent to one-eighth of China's carbon emissions in 2011.

Besides that, producing natural gas from coal requires significant amounts of freshwater supplies.  Four out of five coal-to-natural-gas plants are or will be located in Xinjiang, Inner Mongolia and other northwestern regions, which are among the country's driest lands.
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For most of China's synthetic natural gas plants that are planned in arid areas, Chen said, the costs will multiply, as the plant operator will have to pay for water-saving projects in exchange for water usage rights.

Then, if China puts a price on carbon emissions -- which has already been the case in seven pilot regions -- producing natural gas from coal will become still more costly.

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