Ningxia Baofeng Energy opened a vast complex in northwestern China in March that can convert millions of tons of coal annually into oil, gas, and chemicals. The sector’s capacity is expanding at the fastest pace in years, supported by low-cost coal and state backing.

The industry last year converted 276 million tons of coal, which is nearly a year of Europe’s coal use, into 38 million tons of oil and gas equivalent, or 6% of China’s 685 million tons of imported gas and crude oil, according to the China National Petroleum and Chemical Planning Institute. Coal-to-gas is expected to be the fastest-growing segment, with projects under construction reaching 19.5 billion cubic metres, about one-fifth of LNG imports last year.

Analysts note the biggest threat to the industry is Beijing’s climate agenda. Coal-to-gas emits nearly three times more carbon dioxide during conversion than when it is burned, making the sector’s growth a key factor in why China could fail its 2025 carbon intensity target.