China’s largest coal mining company is set to invest approximately $24 billion in the development of a facility designed to convert coal into petroleum products. This ambitious project aims to address an anticipated surplus in coal supply while exploring alternative uses for the energy source.
The new facility is expected to commence operations in 2027 and will be powered by renewable energy sources, including wind and solar.
As the world’s leading coal producer, China is actively seeking innovative ways to utilize its abundant coal resources, which reached a record output of 4.7 billion tons in 2023. The coal-to-petrochemicals initiative is one such strategy, complementing traditional applications of coal in power generation and steel production.
However, the increase in production capacity comes at a time when the petrochemical market is experiencing a surplus following rapid growth. Last year, profits for coal-to-oil manufacturers plummeted by 53% due to weakening demand, exacerbated by a decline in oil prices that has reduced the profit margins reliant on the disparity between coal and oil prices.
Despite these challenges, coal continues to dominate China’s energy landscape, representing 71% of total energy generation as of last year. China remains the world’s largest investor and developer in wind and solar energy; however, these renewable sources have yet to fully replace coal.
In 2021, Chinese authorities announced a goal to have wind and solar energy exceed fossil fuel-based capacity by 2025. This target was achieved ahead of schedule, with non-hydrocarbon resources accounting for 50.9% of China’s generation capacity this year.
As a result of this transition, coal’s share in total energy generation decreased to approximately 60% earlier this year, driven largely by a significant increase in hydropower generation. While climate activists credit this development to China’s ongoing efforts toward energy transition, the nation still relies heavily on coal as a primary energy source.
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