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China Natural Gas Corp. Ltd. (CNGC) has initiated the first phase of a landmark Chinese project to turn residual coke oven gas into synthetic natural gas (SNG).

The largest such project in the world, the RMB 4.7 billion ($744.71 million) facility will chill off-gas captured from nine coking plants in the Inner Mongolia Autonomous Region's Wuhai City into liquefied SNG, CNGC's holding company Kunlun Energy Co. Ltd. announced on Friday.

Two liquefaction plants in Wuhai's Hainan and Haibowan districts will be capable of producing 500,000 tons of LNG every year from three billion cubic meters of coke oven gas.

The project uses technology from the U.S.'s Black & Veatch, Italian-owned Chemtex Group and Haldor Topsoe from Denmark. Black & Veatch said in March 2011 it would provide CNGC with engineering, procurement and construction services, including the company's Prico refrigeration technology.

"In coke oven gas-rich areas like Wuhai, it is dark even during the day time. This is an excellent demonstration project for the industry to save energy and to diminish emissions in the region," Black & Veatch's project manager Michael Gai said at the time.

The project is projected to cut carbon dioxide emissions by 2.07 million tons and sulphur emissions by 1,640 tons, the announcement said.

Coke oven gas shares similar properties with natural gas, though it has been traditionally used in China as a fuel or a chemical feedstock for methanol production, according to Liu Xintian, a senior commodity analyst with Sunsirs Commodity Data Group.

"Coke oven gas is struggling to compete for access to pipelines due to competition from the growing use of natural gas. In addition, the market for methanol is limited. Transforming coke oven gas into natural gas is a good way of handling the byproduct of coking plants," Liu told Interfax on Monday.

The project includes a 223-kilometer pipeline that will pump coke oven gas to a terminal in the neighbouring Ningxia Hui Autonomous Region owned by CNPC Ningxia Petrochemical Co. The pipeline successfully transmitted purified coke oven gas to the terminal on Sept. 27, according to the announcement.

Ningxia Petrochemical will then use the gas as feedstock for fertilizer production.

CNGC expected the pipeline to start operations last year but the startup was delayed due to the construction of a supporting gas purification facility, CNGC General Manager Zhong Wenxu previously told Interfax.

Gas purification facilities started operations recently and the project will be fully operational next year, Haibowan district representative He Feng told Interfax on Monday.

Wuhai is a major coke production base in China with annual output capacity of 19.10 million tons and estimated coal reserves of three billion tons. The city has 18 coking projects in operation or under construction, each with more than one million tons of capacity, the Wuhai government announced in September.

Wuhai is capable of producing between 2.9 bcm and 3.6 bcm of coke oven gas every year.