As a major multi-billion dollar coal-to-liquids (CTL) plant begins commercial operation, China has set big new national targets for converting coal into oil products and gas.
The developing CTL industry must deliver 13 million tonnes per year by 2020, while coal-to-gas (CTG) must produce 17 bcm, according to the central government’s new Five-Year Plan.
The targets were announced by the National Development and Reform Commission (NDRC) as it continues to unveil new five-year goals for the energy industries, domestic analysts Fenwei Energy said.
In addition to CTL and CTG advances, state enterprises completed coal-to-olefins (CTO) facilities with a capacity of 11.2 million tonnes in 2016, Fenwei said quoting the NDRC. It added that only 3.54 million tonnes of CTO was actually produced.
Newly completed CTL plants are concentrated in China’s northwest region, which is abundant in coal and which is less heavily populated than highly urbanised East Coast provinces. One of these, in Ningxia Hui, was opened at the end of December 2016 by Shenhua Ningxia Coal Industry and is claimed by state news agency Xinhua to be the biggest in the world.
The plant will be capable of producing 4 million tonnes per year of oil products from 20 million tonnes of coal, Fenwei said quoting Shenhua Ningxi deputy general manager Yao Min.
But it comes at a high price. The project has cost parent company Shenhua, China’s biggest state-owned coal miner, US$7.9 billion. “The project … consists of home-grown technology, equipment and materials, breaking the long-time foreign monopoly in CTL core technology,” Fenwei said.
In a full year the Ningxia Hui plant will produce 2.7 million tonnes of diesel, 980,000 tonnes of naphtha and 340,000 tonnes of liquefied gas, Yao told Fenwei.
Meanwhile, Shenhua said it was planning to begin construction on the second phase of its CTO plant at Baotou in northern Inner Mongolia by June. The US$264 million second phase will give the plant an annual capacity of 2 million tonnes of methanol and 700,000 tonnes of polyolefins from coal.
Although major investment has gone into Ningxia Hui and Xinjiang regions, Inner Mongolia is currently the biggest CTL producer, Fenwei said.
Projects involving subsidiaries of Shenhua and China Datang, another major state-owned coal miner, last year produced 1.24 million tonnes of CTL products and 1.73 bcm of gas from coal.
In Anhui Province, Shanxi Lu’an Mining is building a pilot demonstration project at Lu’an in preparation for plans to construct a 1.8 million tonne per year CTL plant.
Yankuang, another state miner, has laid plans to develop a 10 million tonne per year CTO plant at Yulin in Shaanxi Province. Yankuang has signed a provisional agreement for a joint venture with American Air Products and Chemicals to develop a 4 million tonne oil products capacity following the completion of a smaller pilot project.
Shaanxi is one of several provinces that has benefited in recent decades from coal production but which is now struggling economically after hundreds of smaller, inefficient mines were closed as part of national efforts to reduce pollution caused by coal burning.
But these coal conversion projects come with another high cost: heavy consumption of water in areas where there are already severe shortages.
The surge in development of coal conversion projects is also happening when China is importing record volumes of cheap crude oil to feed a refining industry that is continuing to expand beyond domestic needs. One result was that record volumes of diesel and gasoline were exported in the second half of 2016.