State oil corporation PetroChina has mastered a technology for extracting natural gas from solid coal formations at great depth. This will allow China to increase domestic fuel production and reduce its dependence on liquefied natural gas imports.
The resource in question is coal rock gas (CRG) — currently produced commercially only in China. Extraction relies on horizontal drilling and hydraulic fracturing, the same technologies PetroChina has been refining for shale gas over more than a decade. The main reserves are concentrated in the Ordos Basin, which spans three provinces.
According to company experts, CRG production could reach 30 billion cubic metres per year by 2035. For context, record shale gas output last year accounted for 10% of the country’s total gas production. The potential of coal gas is estimated at 13 trillion cubic metres of technically recoverable resources across 14 coal basins at depths of up to six kilometres.
The first commercial breakthrough came in 2021 at the Daji field in the Ordos. A well drilled to 2,200 metres with a 300-metre horizontal section yielded a flow rate of 100,000 cubic metres of gas per day. By the end of 2025, China had drilled more than 700 such wells and produced 4.2 billion cubic metres of coal gas.
The key challenge, however, remains high production costs. A precise estimate is still difficult to establish, but it is clear that costs exceed those of shale gas — whose break-even price in the southwest Sichuan Basin stands at 1.7–1.8 yuan per cubic metre, compared to 0.6–0.8 yuan for conventional gas. To reduce costs, PetroChina may combine CRG development with the production of cheaper tight-reservoir gas and coal mine methane, as well as repurpose existing wells to drill into new horizons.
Chinese scientists are also pursuing technological breakthroughs — for example, replacing sand and chemicals in hydraulic fracturing with gas and electric pulse stimulation. S&P Global Energy analysts believe that, given China’s scale and existing infrastructure, the all-in cost of CRG could prove comparable to shale gas or even lower.
Coal gas is not yet included in the subsidy system that supports shale gas and coal mine methane, but experts expect that support will materialise as commercial discoveries multiply. For China — which is striving for energy independence and could be consuming up to 650 billion cubic metres of gas per year by 2040 — the new technology is becoming a strategic priority.
PetroChina is also attempting to replicate its Chinese success abroad: last year, two exploratory CRG wells were drilled in Australia’s Bowen Basin.
China is thus not merely catching up — it is pioneering a new direction in gas production that could reshape the global energy landscape and strengthen Beijing’s negotiating position with Moscow over the proposed Power of Siberia 2 pipeline.
Source: Reuters
Image: Reuters
