Three Coal-Liquefaction Projects Set to Begin Production in China Gain Wide Attention

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Researched by Industrial Info Resources (Sugar Land, Texas)--Three coal-liquefaction projects in China are estimated to go into production in 2008, reporters learned recently at a forum on new energies and industrial development policies at the Shanxi Coal Expo. Shenhua Group and Yitai Group, both in the Inner Mongolia region, and Lu’an Group in Shanxi are running the projects.

The three projects, along with seven other coal-liquefaction projects by Shenhua, Yitai (Inner Mongolia), Yankuang (Shandong) and Lu’an Group (Shanxi), will total an annual production capacity of 143,200 tons of oil.

Lacking popular approval in other countries because of the controversial nature, the three projects will greatly impact the development of similar projects in China in the future.

A “rich coal, poor oil” energy structure and a relatively low coal price serve as the main driving force in the development of the coal liquefaction projects.

Some say the pricing system for oil products also influence the future of this new type of energy production. Only when the prices of product oils reasonably reflect the fluctuating oil prices on the international market can this industry develop in China.

But the nation is still prudent toward its development despite vigorous support and keeps tight watch on its development, with several demonstrative projects underway, including the three projects, an industry insider told Chinese news media.

The Shenhua Group’s $3.3 billion Phase I project, which began in 2004 in Erdos, Inner Mongolia, with support from the state government, is designed to produce 5 million tons of oil.

But still in the trial stage of industrialization and demonstrative phase, coal liquefaction faces many obstacles in investment and technologies, which is important to its development.

Considered elemental to the progress in technological independent intellectual property rights, energy utilization situation and environment protection, coal-liquefaction projects are included in the development plans of several coal-mining provinces, such as Inner Mongolia, Shanxi, Ningxia, Henan, Shaanxi and Guizhou.

By making the Chinese coal industry’s11th five-year plan (2006-10) public, coal-liquefaction projects are limited to demonstrative construction before 2010, while large-scale commercial operations coveted by resource-rich provinces are still far from the nation’s development plans.

Experts estimate that by 2020, shortage of oil products in China will achieve 200 million tons. Importing about 120 million tons, another 60 million to 80 million tons can be produced through coal liquefaction. More than 20 million tons can be produced through indirect coal liquefaction, accounting for about 15% of the volume imported of that year.

But currently, China has stopped approving or putting on records of coal chemical projects for other concerns, such as water conservation and environmental protection.

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