China's coal production capacity will exceed its output target by at least 16 percent by 2010, a development that could derail the government's energy-efficiency plans. Coal production capacity will top 3.1 billion tons by 2010, 500 million tons more than the government's plan, according to data from the coal mine safety administration. The National Development and Reform Commission (NDRC), unveiled the country's five-year development plan for the coal industry earlier this year, estimating a demand of 2.6 billion tons in 2010 while setting an output target at the same level. The NDRC said it had taken into account energy-intensive industry curbs, technology innovation, and energy-saving campaigns when making the demand estimate.

The largest facility in the world that will produce liquids from coal using a technology known as direct gasification is in its final stage of construction and will start production late in the year. Towering above the sweeping grasslands of Erdos, in north China's Inner Mongolia Autonomous Region, two 60-meter-high cylindrical structures stand out against the skyline. The structures—reactors for liquefying coal—are part of a project to mass produce desperately needed fuel oils from China's rich coal resources. The facility in Erdos will produce mostly diesel oil, plus liquefied petroleum gas (LPG), naphtha, and hydroxybenzene.

Sinopec, has decided to increase its natural-gas output goal in southwest China's Sichuan Province to three billion cubic meters for this year. The figure is 25 percent higher than the original goal. To achieve the revised goal, the company plans to start drilling 40 new gas wells in the coming 100 days and build an additional annual production capacity of 189 million cubic meters.

Sinopec is planning to build a 1,702-kilometer-long pipeline by 2010 to transport natural gas from Sichuan to the eastern part of China, with a designed annual transport capacity of 12 billion cubic meters. The cost of the project is estimated at 65.7 billion yuan (8.6 billion US dollars). The natural-gas supply is for Sichuan, Hubei, Jiangxi, Anhui, Jiangsu, and Zhejiang provinces and Chongqing and Shanghai municipalities.

China produced 5.4 billion cubic meters of natural gas in April 2007. The output in January–April reached 22.1 billion cubic meters, up 15.1 percent year on year, according to the National Bureau of Statistics.

The Chinese government is encouraging its flagship state-owned companies to get back for a domestic stock-market listing to soak up excessive liquidity. PetroChina Company Limited, a subsidiary of China's largest oil producer, China National Petroleum Corporation (CNPC), announced plans for a public offering of up to 4 billion A shares on the Shanghai Stock Exchange. The fund would be mainly used to finance the exploration and development of domestic petroleum and gas resources; the construction of large refinery, petrochemical, and gas pipeline projects; and the acquisition of overseas petroleum and gas resources.

China National Offshore Oil Corporation (CNOOC), China's largest offshore oil company and third-largest oil producer, is another big company expected to list on the Shanghai A share market.

China's reliance on external crude-oil supply will exceed 50 percent in the future, according to National Development and Reform Commission (NDRC). Crude-oil imports have risen since last year. While crude-oil consumption totaled 320 million tons last year, of which 150 million tons are imported. The estimation of import volume this year will be 160 million tons, an increase of 10.3 percent.

The Shanghai LNG terminal will be supplied by the Malaysian energy company Petronas under a 25-year contract. Petronas will start shipping LNG to Shanghai in mid-2009, starting off with 1.1 million tons a year and gradually increasing the load to three million in 2012.