In the wake of the Iran war and the resultant closure of the Strait of Hormuz that cut off a key source of oil for Asia, the Chinese firm Hengyi Petrochemical and the Indian government are each launching multibillion-dollar coal-gasification initiatives that are meant to boost energy security.
Hengyi plans to spend $3.78 billion on a coal-to-ethylene glycol complex in Xinjiang, in Western China.
The Chinese company operates a massive oil-refining and aromatic-chemical complex in Brunei, which it is expanding. But Hengyi says the coal-based project is meant to reduce its reliance on oil as a raw material and help it mitigate oil price fluctuations.
“Amidst increasing uncertainties in the global energy supply, the integrity and autonomous controllability of industrial supply chains have emerged as critical cornerstones of national strategic security,” the company says, according to an automated translation of a stock market disclosure. “Ensuring a secure and reliable supply of raw materials has become a primary objective for enterprises, and the strategic advantages of coal-based chemical industries—rooted in coal resources—are becoming increasingly evident.”
The plant will have the capacity to make 2.4 million metric tons (t) per year of ethylene glycol, which the firm will use to make polyester fiber. The plant will also produce dimethyl carbonate, a battery electrolyte.
Coal is not a new chemical raw material in China. Companies often use it to make petrochemicals such as methanol, olefins, ethylene glycol, and vinyl. And the country derives nearly 60% of its energy from coal, according to the International Energy Agency (IEA).
“Since the launch of China’s first coal-to-olefins plant in 2010, the country has built the world’s largest modern coal chemical industry, involving investments of roughly half a trillion dollars,” says Aiqun Yu, research analyst and senior East Asia strategist for Global Energy Monitor, a nonprofit that tracks energy infrastructure.
Though energy security is part of the rationale for the Hengyi project, it was in the works long before the Iran war, Yu says. “The Hengyi project indeed went into construction on March 20, 2026, 3 weeks after the start of the conflict. However, the project is a $3.8 billion investment project. The preparation took a few years.”
Separately, the Indian government has approved a $3.9 billion program to promote coal-gasification projects. The country aims to convert 75 million t of domestic coal per year into products such as methanol and ammonia. The government forecasts that the program will create 50,000 jobs across 25 projects.
India has an estimated 400 billion t of coal and 47 billion t of lignite reserves. According to the IEA, the country derives 46% of its energy from coal.
The rationale for the Indian investment is substitution for imported products such as liquefied natural gas, urea, ammonia, ammonium nitrate, methanol, and coke. A government statement says imports of such products cost India $33.4 billion in 2025, and it calls the heavy reliance on imports “a vulnerability further exposed by the ongoing geopolitical situation in West Asia.”
Joe Hittinger, project manager for chemicals at Global Energy Monitor, points out that the Indian government explicitly ties its program to the crisis in the Strait of Hormuz. “That said, it builds on a longer policy trajectory that’s been developing for several years, so I’d characterize the new scheme as accelerating or justifying an existing program rather than a new response to the crisis,” he says.
Hittinger notes that making chemicals out of coal rather than oil or natural gas comes with much higher greenhouse gas emissions. “Each new commercial-scale facility locks in decades of higher emissions than the conventional alternative,” he says.
Xiaomin Liu, associate research director of China coal and power at S&P Global Energy, has a more optimistic view, saying China is trying to rein in emissions from new coal projects. “The Chinese government is pushing all the coal chemical projects to reduce carbon emissions by coupling the coal chemical projects with green hydrogen and carbon capture and storage facilities,” Liu says in an email. “In the long term, we believe that the renewable based hydrogen will be consumed in more energy and chemical scenarios and lead to the fadeout of the coal chemical sector.”
