The project, located in Huocheng County, is designed to produce 6 billion cubic meters of gas annually. China Power Investment Corporation will invest 50 billion Yuan (about 8.05 billion U.S. dollars) in the project.
It is one of four coal gasification projects for which preparatory work has recently been approved. The other three, located in Shanxi Province and Inner Mongolia Autonomous Region, have a combined capacity of 12 billion cubic meters annually, with a budgeted investment of 100 billion Yuan.
To date, the National Development and Reform Commission has ratified four coal gasification projects, with a total output capacity of 15 billion cubic meters and an investment of nearly 100 billion Yuan.
Sinopec is also planning an 8,280 kilometer-long gas pipeline from Xinjiang to Guangdong and Zhejiang provinces, and it will launch a coal gasification project with a capacity of 20 billion cubic meters in Xinjiang.
Over 60 percent of the power driving China's roaring economy comes from coal, which has resulted in serious pollution problems that are forcing China to explore cleaner sources of energy.
In recent years China has clearly increased investment in nuclear power, hydroelectric power, natural gas, solar energy, wind power and other clean and renewable energy fields.
With the development of new technologies, coal gasification will also become a key sector in the country's clean energy initiative, analysts have said.