The launch of an integrated innovation base project in Northwest China's Xinjiang Uygur autonomous region marks a significant milestone for China's energy sector, as Xinjiang becomes the first in China to apply second-generation direct coal liquefaction technology, said experts.

With a total investment of 170 billion yuan ($24.06 billion), the project, located in Hami, Xinjiang, will see its first phase put into operation by the end of 2027, said its operator CHN Energy Investment Group (CHN Energy).

The project will also apply renewable green hydrogen coupled with coal chemical technology, seeking new breakthroughs and key core technologies toward a new industry ecosystem, said the company.

CHN Energy is the world's largest power producer and the top wind power developer in terms of installed capacity.

Wang Lining, director of the oil market department of the Economics and Technology Research Institute under China National Petroleum Corp, said the project will significantly improve efficiency and reduce reliance on imported oil.

By utilizing domestic coal resources, the project will further enhance energy security and support China's green transition by incorporating cleaner and more efficient energy solutions into its industrial framework.

Additionally, it sets a precedent for large-scale application of advanced technologies in future projects, Wang said.

The second-generation direct coal liquefaction technology, combined with the latest indirect liquefaction and green hydrogen coupling technologies, positions China at the forefront of coal-to-liquid innovations.

By using its own proprietary technologies, China will enhance its competitive edge in the global energy market while fostering domestic technological independence, he added.

Both direct and indirect coal liquefaction convert coal into liquid fuel, enhancing energy security by utilizing abundant coal reserves as an alternative to conventional petroleum. Seen as solutions to reduce reliance on imported oil, they produce synthetic crude oil, which can be refined into gasoline, diesel, and other hydrocarbons.

While direct coal liquefaction breaks down coal directly using hydrogen and catalysts, making it simpler but less efficient and dependent on high-quality coal, indirect coal liquefaction gasifies coal into syngas before converting it into liquid fuels, allowing for greater flexibility in coal quality and output.

While indirect coal liquefaction is more energy-efficient and can produce a wider range of products, it is also more complex and costly to operate compared to direct coal liquefaction.

The project, taking advantage of the unique oil-rich coal resources and abundant wind and solar resources of Xinjiang, has been planned and developed under an integrated model that combines coal, oil, gas, chemicals, heat, electricity, and new energy, said the company.

Once the entire industry chain of the project is put into operation, it can create 5,500 direct jobs and nearly 30,000 indirect jobs, significantly enhancing the industrial incubation capacity of Xinjiang. This will effectively improve the living standards of local residents and become a strong engine for high-quality regional economic development and improvements in people's livelihoods, it said.

CHN Energy has been continuously accelerating its green energy transition during the first half of this year while ensuring domestic energy security, helping to diversify the nation's energy mix and reducing dependence on fossil fuels.

The company kicked off new energy projects with a capacity of 12.42 million kilowatts during the January-June period, and 9.06 million kW were put into operation, bringing the total installed capacity to a historic milestone of 100 million kW.

Liu Guoyue, chairman of CHN Energy, said the project will act as a catalyst for local economic growth, stimulating the development of related industries and technological innovation while enhancing Xinjiang's industrial capacity and driving further investments.

The company will fully utilize the roles of centrally administered State-owned enterprises in technological innovation, industry control and safety support, ensuring that Xinjiang becomes an important strategic development area and a fertile ground for innovation, Liu said.