Within the coal to synthetic fuels (future fuels) sector, there have been various initiatives to establish a viable coal conversion approach. At the same time, various design and operational limitations have become evident that have caused the overall programme to be delayed. This has been compounded by major falls in the global oil price, which have resulted in further disincentives to proceed with the technology deployment programme. That said, China has approached all these issues with a strong strategic consideration and an avoidance of short-term reactions.
Maximising utilisation efficiency with improved environmental impact
The Government has identified the strategic importance of introducing Coal-to-Substitute Natural Gas (CTSNG) to increase the availability of methane, especially to limit local air pollution from domestic and non-power industrial applications. Coal-to-liquid (CTL) can fulfil a similar role, through the production of gasoline/petrol with near-zero aromatics and no sulphur, so helping to limit the formation of haze and smog in key parts of the eastern side of the country.
As noted above, the Government targets for gas availability would only be met through the combination of various sources, several of which are well behind their deployment schedule. Consequently, since there is also the need for further major transport infrastructures to be established from remote locations, it is questionable if their respective contributions to the overall natural gas supply will be adequate to meet the 2020 target.
The National Development and Reform Commission of the People's Republic of China (NDRC) aligned the development targets for the coal-to-chemicals sector with the energy and carbon intensity issues to be addressed during the 12th FYP (ICIS, 2011). As part of its energy conversion efficiency drive, it recognised the importance of economies of scale and introduced minimum plant size requirements for manufacturing chemicals and fuels from coal, below which approval would not be given. For the synthetic fuels considered in this report, the minimum annual product capacity requirement for coal-to-methanol and CTL are both set at 1 Mt, while for CTSNG the annual minimum must be 2 billion m3 (SZW Group, 2011). It has also stated that any new project is required to be consistent with China's overall plans to control coal consumption and is encouraged to prioritise the use of low-quality coals with high sulphur and ash contents to reduce their use elsewhere (Reuters, 2015). CTL plants would be permitted to use a maximum of 3.7 tonnes of coal for each tonne of oil produced, while CTSNG projects would have to use no more than 2.3 tonnes coal for every 1000 m3 of gas produced.
Water availability for industrial processes is becoming a significant problem. The national policies prohibit using residential and agricultural water for coal conversion projects, restrict SNG and CTL projects in regions with water scarcity, and prohibit coal conversion in regions where water consumption has reached quotas. Policies also prohibit coal conversion in regions where industrial impact exceeds environmental tolerance. Policies prevent coal conversion in regions that import coal, while promoting coal conversion in regions with adequate water and indigenous coal resources (China Greentech Initiative, 2014).
Just as standards for coal use have provided a driver to improve coal gasification efficiency, so the need to conserve water has led to the development of water saving and water purification schemes. An example is the need to address the adverse environmental impact arising from the waste water of the fixed bed coal gasifiers. Such plants produce a difficult effluent, which contains large amounts of phenol and salt in the waste water that is difficult to treat. The Beijing Research Institute of Coal Chemistry (BRICC) has utilised an advanced oxidation method to realise the open cycle of macromolecular organics in waste water and enhance the biochemical ability of effluent. This has led to the development of various techniques, which provide options for:
- An efficient extraction technology for the removal of phenol and ammonia from coal gasification effluent, with an extraction rate higher than 93%; and minimal loss rate of the extraction agent; and
- COD (chemical oxygen demand) removal from high concentration brine water, with associated crystallisation of the salts.
Such techniques have shown promising results and large-scale trials on industrial-scale coal gasification are planned (Du, 2016).
The NDRC has also advised that, for all new units, approval to proceed will require the owners to show how CO2 capture technology could be applied in due course, in effect a form of CO2 capture-ready requirement.
Technology improvement options
For CTL and CTSNG technologies, there is scope to improve the current options and to establish alternative possibilities. Thus, for CTSNG, there are R&D plans to further develop the key aspects of the methanation technology, such as improvements in fixed bed gasification pressure, efficient waste water treatment and reuse, while also improving energy efficiency and overall financial return (Yao, 2016). From a process perspective, there is a need in both cases to ensure operational stability, optimise the individual system components such as gasifiers, as well as better integrate the overall engineering design, including air-cooling and other water management technologies. The expectation is that the NDRC wants to put together a complete process package, with intellectual property rights, that improve the stability and economics of large plants.
Many of the initial projects were based heavily on imported equipment, which led the government to pursue localisation for manufacture of such items together with a plan for the ‘Introduction, digestion and absorption of imported advanced technologies’. There is an increasing emphasis on the use of domestic designed coal gasification and some downstream plant, in line with State government directives. At the same time, there continues to be a significant input from foreign technology suppliers for equipment such as large-scale high efficiency air separation units together with downstream syngas processing stages and the associated catalysts. This push to establish Chinese equipment industry development depressed the price of imports and hence has reduced overall project investment requirements.
Government financial interactions
Consumption tax is imposed on all the organisations that either manufacture or import taxable products, process taxable products under consignment, or sell taxable products. It is levied on five categories of products that include high-energy consumption and high-end products, such as passenger cars and motorcycles, and non-renewable and non-replaceable petroleum products, such as gasoline/petrol and diesel oil. Until recently, this included CTL products (China Briefing, 2016).
The State has various means to incentivise CTL activities, and recently it has chosen to exempt the CTL companies from payment of consumption tax, as a positive policy shift to support this part of the coal conversion sector. To put this in context, CTL projects break even when the coal price is about 400 yuan (US$58) per tonne with crude oil at about 60 US$/bbl. At current coal and oil prices, the industry has been operating below this breakeven position, with the consumption tax being a significant contributor to that deficit. However, since February 2017, the State Government agreed to give preferential policies for CTL demonstration projects, with a consumption tax exemption for five years. For Lu'an Group, for example, their annual tax commitment on their operational 1.8 Mt CTL plant will be reduced by nearly RMB 2.5 billion (US$363 million).
- Bumi Resouces
- Adaro Energy
- Indo Tambangraya Megah
- Berau Coal
- Bukit Asam
- Baramulti Sukses Sarana
- Harum Energy
- Mitrabara Adiperdana
- Samindo Resources
- United Tractors
Source: IEA Clean Coal Centre
