China kicks off construction on first coal-to-gas plant

China is building its first large-scale coal-to-gas demonstration plant in Inner Mongolia at a cost of $3.7bn (£2.3bn).

Construction on the project commenced last week in Chifeng city, according to state-run media. It is being built by China Datang, the country’s second-biggest power producer.

The plant will use heat and pressure to convert coal into synthetic gas, which will be piped through a 381km-long gas transmission line to Beijing.

It is being built in three phases, with 1.3bn cubic metres of gas to be supplied annually to the capital by late 2010, rising to 2.68bn cubic metres in 2011 and four billion cubic metres in 2012.

The facility will also produce synthetic liquid oil, including naphtha.

According to Datang announcements filed last year with the Shanghai Stock Exchange, the plant will use gasification technology by US-based GreatPoint Energy, which uses a proprietary catalyst that converts coal and other carbon-based materials into methane – the primary component of natural gas.

Datang is financing about three quarters of the project. Other investors include gas distributor Beijing Gas Group and Hong Kong-based private equity fund company New Horizon Capital, said the disclosures to the stock exchange.

Inner Mongolia is rich in coal mines, making it a practical location for the plant, which is expected to consume an estimated 725 tonnes of coal daily in the first phase of operation.

Government officials have set aside coal fields with more than 1.5bn tons of total reserves to ensure a steady supply of lignite, or brown coal, for the gasification plant, the disclosures said.

Government calculations put Beijing’s annual natural gas needs at seven to eight billion cubic metres, with demand growing by 20 per cent every year.

Datang deputy general manager Qin Jianming told the state-run Xinhua news service that the plant “could solve the deficiency of natural gas supply to Beijing and reduce the city’s dependence on limited gas sources and transmission lines to ensure the capital’s energy security".

Officials view clean coal technologies as a way of using the country’s substantial coal reserves while reducing greenhouse gas emissions.

The coal-to-gas project is the country’s second clean coal project to get under way this year. Construction on a power plant using integrated gasification combined cycle technology began in June in Tianjin city.