August 24, 2026 - The world’s largest coal-to-liquids plant is turning coal into oil products that can power rockets and serve as machine lubricants while boosting its value sevenfold, according to a Chinese newspaper.

The production line, built by China Energy Group Ningxia Coal Industry Co Ltd, began full operations in northwest China’s Ningxia Hui autonomous region last month and processed 24 million tonnes of coal in 2025 – a quarter of the region’s total annual output, according to a report published by Science and Technology Daily on Wednesday.

The technology has been a boon this year for China, which sourced more than 40 per cent of its crude oil from the Middle East before the Strait of Hormuz was blocked by the US-Israel war on Iran.

At one point, international oil prices rose above US$100 per barrel, making turning coal into oil a very profitable business. According to the report, the project has not only generated substantial economic returns, it has also helped to reduce reliance on imported oil.

China’s energy structure has long been defined by its abundant coal, limited oil and scarce natural gas reserves. In Ningxia, coal accounts for more than 90 per cent of the region’s energy use.

The facility’s core technology – known as indirect coal liquefaction – involves heating coal with oxygen and steam to turn it into a synthetic gas of carbon monoxide and hydrogen.

After purification, the gas is converted into environmentally friendly oil products that are low in sulphur and aromatics.

“This technology is the most profound ‘magic’ in the field of coal chemical engineering,” He Peng, a manager with Ningxia Coal Industry, told the newspaper.

The process has been long and required enormous investment, with the report noting that as early as 2004 the Chinese government sent Ningxia Coal Industry’s predecessor to negotiate with foreign firms to licence the coal-to-liquids technology.

The global pioneer in the field was South African company Sasol, which capitalised on its proprietary know-how by repeatedly raising its price, demanding as much as US$2.5 billion for one synthesis alone. The negotiations dragged on for years without resolution.

In 2009, China’s domestic research efforts achieved a breakthrough when Synfuels China Technology completed a 160,000-tonne-per-year indirect coal liquefaction pilot line and produced products that met industry standards.

At that point, Ningxia Coal Industry decided to move forward independently, using Synfuels’ fully licensed home-grown technology.

The path to self-reliance was beset with challenges, from clogged furnaces to easily broken nozzles and catalysts that were unstable. The most critical component was the gasifier, the first step in turning coal into liquid fuel.

The gasifiers built using foreign technical routes could only handle high-quality premium coal and were also prohibitively expensive to modify, forcing the team to start from scratch.

In 2012, the domestically developed Shenning furnace was born, opening a new avenue for the clean use of lower-grade coal, thanks to its ability to handle a wide variety in quality.

The following year, the National Development and Reform Commission gave formal approval for the megaproject, designed to produce 4 million tonnes of oil products annually.

The world-class facility, covering an area larger than 650 football fields, finally produced its first drop of qualified oil in 2016.

Coal enters this system and emerges transformed – into diesel, naphtha, liquefied gas, sulphur, high-purity waxes, and a host of other products, each with greater value.

The report gave two examples of the uses of these products, across industries.

Using its own core technology and working with several partners, China Aerospace Science and Technology Corporation developed a coal-based rocket fuel that helped to launch the Long March-12, reducing the industry’s dependence on a single fuel source.

The report also named Ningxia Coal Industry’s self-developed C Energy+ series of high-end lubricants, with 11 products for both cars and industrial use. Its 68# anti-wear hydraulic oil performs on a par with leading international products, it said.

The upgraded production line means higher-end products and improved safety, with the project standing as a model for China’s coal-to-liquids industry, according to the report.

An industry insider told the Science and Technology Daily that “China’s coal-to-liquids sector has very few high-end products” at present.

“Most top companies make mid- or low-end items, and high-end ones account for only a small share. Many advanced research findings are still in the lab and haven’t been scaled up for production,” the insider said.

Following the latest upgrades, the project’s core processing units were also now operating with 99.8 per cent automated control, enabling long-term unattended operation, the report said.

The whole industry should produce more valuable oil products and speciality chemicals, integrate more green hydrogen and green electricity in coal plants to cut emissions, and deploy robots and smart sensors in dangerous areas to keep workers safe, it said.