Shenhua Group Completes Construction of Coal Liquefaction Line

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Researched by Industrial Info Resources (Sugar Land, Texas)--China's coal production giant, Shenhua Group Corporation Limited (Beijing), announced that it has completed construction of its first coal liquefaction line. The production line was designed with a capacity to produce 1.08 million tons of oil per year from 3.45 million tons of coal and is expected to begin industrial operation in September. Shenhua wants to invest $34.8 billion to form an annual coal liquefaction capacity of 5 million tons before 2009 and 30 million tons before 2020.

Similar projects by other coal producers are occurring throughout the country. If all of the plans for coal liquefaction are realized, China will have a coal liquefaction capacity of 50 million tons, with an investment of over $60 billion, by 2020.

The large amount of investment in coal liquefaction originates from both China's growing demand for energy and the soaring international oil prices. In 2006, China imported 145.2 million tons of crude oil, which represented 47% of the country's total consumption and an increase of 14.5% from 2005. Meanwhile, the international price of crude oil has jumped to over $130 a barrel. China has the world's third largest coal reserve, amounting to about 687.2 billion tons or 11% of the world's total coal. With such a large supply of coal, substituting coal for crude oil in order to meet the country's growing energy demand is a reasonable move for China.

China previously had two major concerns in developing coal liquefaction, both of which seem to have been resolved. The first issue involved the economic feasibility of producing oil from coal. Experts say that approximately four tons of coal is needed to produce one ton of oil; therefore, as long as international oil prices are higher than $30 a barrel, coal liquefaction is profitable. The second concern focuses on the impact on environment. Coal liquefaction consumes a great deal of water and produces a large volume of carbon dioxide emissions. However, with new coal-cleaning technology, the coal-liquefaction process is now much less detrimental to the environment.