China has set up a massive coal chemical project in Ordos, the Inner Mongolia autonomous region, marking another step in the diversified and clean use of its abundant coal reserves.

The 59 billion yuan ($9.1 billion) plant, set up by Zhongtian Synergetic Energy Co Ltd, will be one of the largest coal-based chemical companies and enables it to compete with other petroleum and natural gas-based chemical firms.

By converting coal to methanol and the methanol to olefin, the company can produce 3.6 million metric tons of methanol and 1.37 million tons of plastic products such as polypropylene and polyethylene each year, which is the largest capacity among all coal-based chemical companies in China, according to the company.

It also plans to expand its annual coal-to-olefin capacity by 1.8 million tons and coal-to-methanol capacity by 1.8 million tons by 2020.

The company has invested 862 million yuan for sewage treatment to realize almost zero emissions of pollutants in its waste water, while the exhaust emissions are well under the national standard.

Manufacturing chemicals from coal is essential for China's long-term energy security as despite its rich coal reserves, it is still lagging in oil and gas production, said Wu Lixin, deputy director of the strategic planning research department at the China Coal Research Institute.

Chinese coal enterprises have made large investments in turning coal into liquid fuel and chemicals through liquefaction and gasification, Wu said, adding that the country may not have the most advanced technology in the coal-based chemical sector, but has tremendous scale.

Instead of simply burning the dirty fuel, these technologies allow for cleaner and more efficient use of coal, Wu said.

Zhang Likuan, a senior analyst at the China Coal Data Exchange Center, said: "This sector offers bright prospects and support to the petrochemical industry in China, since the country imports more than 60 percent of its oil requirements from other countries."

In the next three to five years, it is unlikely that China can grow domestic oil output by much, so anything economically viable to cuts its oil and gas imports is seen as desirable, Zhang said.

Shenhua Group Corp Ltd, which was merged with China Guodian Corp to create China Energy Investment Corp last year, operates five coal-to-liquid fuel and chemical projects in the Ningxia Hui autonomous region, the Inner Mongolia and Xinjiang Uygur autonomous regions.

China National Coal Group Co Ltd, which is the largest shareholder of Zhongtian Synergetic Energy, has several other coal-based chemical projects in Shanxi, Shaanxi provinces and Inner Mongolia. It is also pushing for the upgrading of its coal-based new materials and fertilizer ventures.