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China's largest coal-to-liquids plant has become seven times more valuable after converting coal into high-value oil products, according to a Chinese newspaper. The plant, operated by China Energy Group Ningxia Coal Industry Co Ltd, began full operations in the Ningxia Hui autonomous region last month. In 2025, it processed 24 million tonnes of coal, which is a quarter of the region's total annual output.

This technology has been particularly beneficial for China, which relied heavily on Middle Eastern oil imports before the Strait of Hormuz was blockaded by the US and Israel in their conflict with Iran. International oil prices soared above US$100 per barrel, making coal-to-liquids production highly profitable. The project has not only generated significant economic returns but also reduced China's reliance on imported oil.

Ningxia, where the plant is located, accounts for over 90 percent of the region's energy use, with coal being the dominant fuel source. The key technology behind this transformation is indirect coal liquefaction, which involves heating coal with oxygen and steam to create a synthetic gas of carbon monoxide and hydrogen, which is then purified into environmentally friendly oil products.

This process, considered a "magic" in coal chemical engineering, has been long in development and required substantial investment. China first explored this technology in 2004 by negotiating with foreign firms to license the coal-to-liquids technology, but the talks were unsuccessful. In 2009, China achieved a breakthrough when Synfuels China Technology completed a pilot line that produced oil products meeting industry standards.

Ningxia Coal Industry then proceeded independently, using this domestically licensed technology. The path to self-reliance was fraught with challenges, including clogged furnaces and unstable catalysts. However, the development of the Shenning furnace, a domestically designed gasifier, solved these issues and allowed the plant to handle lower-grade coal.

The facility, covering an area larger than 650 football fields, began producing oil products in 2016, converting coal into diesel, naphtha, liquefied gas, sulphur, high-purity waxes, and other valuable products. These new products have a wide range of applications, including rocket fuel for China Aerospace Science and Technology Corporation's Long March-12 and high-end lubricants for both cars and industrial use.

The upgraded production line now operates with near-99.8 percent automated control, enabling long-term unattended operation. The industry should increasingly focus on producing high-end products, incorporating green hydrogen and electricity, and deploying robots and smart sensors to enhance safety, according to an industry insider.