3.1 STRATEGIC CONSIDERATIONS
There are several pre-requisites for establishing coal-to-chemicals technologies (IEA, 2006), which are the need to:
- have available large reserves of low-cost gasifiable coal, with stranded assets, due to either too low-quality or location, likely to be particularly attractive;
- have a host government with the ability and will to provide enabling support for the very large capital investments that are required;
- be able to cover the costs for infrastructure needs both for the supply of feedstocks and for transporting the end products; and
- have the means to ensure adequate institutional capacity requirements.
Within this context, China’s fossil energy resources are coal-rich, oil-and natural gas-lean, coupled with a major and growing demand for fuels and chemical products, which raises significant security of energy supply issues. For example, in 2010, China’s annual crude oil demand was about 450 Mt, of which some 200 Mt were provided from domestic sources and the remainder via imports. For 2030, the expectation is that total demand may be some 800 Mt, with domestic demand at best managing 200–220 Mt. The imports will be as crude oil rather than refined products, as China has expanded its refining sector and will continue to do so for the foreseeable future (Wu, 2012). There is a similar situation for natural gas, with likely annual demand for 2030 being over 550 billion m3 , of which domestic supplies can provide some 200 billion m3 , excluding unconventional sources.
The establishment of coal-to-chemicals, liquid fuels and synthetic natural gas is seen as a potentially attractive means to counter this situation, while also providing a way for the major cash-rich state-owned enterprises from the coal and power sectors to continue to diversify their energy product portfolios, in line with national strategic initiatives to establish large-scale integrated energy companies. Consequently, in order to promote domestic innovation and improved resource use, since 2004 the Chinese State Government has sought to determine the technical and economic viability of using gasification-based coal conversion to produce both synthetic oil and gas, and to manufacture various chemical products (Minchener, 2011a). This first comprised the introduction of various policies and regulations to initiate an expansive development plan that was designed to test various gasification-based coal conversion techniques and take forward the more promising options towards commercial deployment. The focus is on using low-grade coals, in the north and west of the country (Figure 4). However, with concerns about water use, and the recognition that in a global market the outputs from coal conversion technologies are commercially vulnerable to imported petrochemical-based alternatives, the implementation plan has been a cautious one, at least by Chinese standards.
Figure 4 Map of China indicating the geographical distribution of coal resources (Wikimedia, 2013)
3.2 STEPS IN ESTABLISHING THE CHINESE COAL-TO-FUELS AND CHEMICALS SECTOR
China operates a top-down command economy, which is structured around a five-year planning cycle, as defined by the Five-Year Plan for National Economic and Social Development (FYP). This sets out the intended way forward for the nation and provides guidelines, policy frameworks, and targets for policy-makers at all levels of government. Each plan provides top down overall objectives and goals related to economic growth and industrial planning in key sectors and regions, while more recently also covering social issues. Although the timescale is nominally five years, many policies and directives flow through from one plan to the next. The process begins with State Government guidelines and supporting policies together with targeted policy initiatives, which are prepared by various national commissions and ministries. These then form the framework against which provincial and local organisations provide detailed work plans for achieving the designated targets.
The State Government’s initial approach during the 11th FYP (2006-2010) was to encourage various coal-to-chemical projects to be established to produce syngas as a building block for ammonia, fertiliser, hydrogen and methanol (Minchener, 2011a). This led to the construction of many units of varying sizes with the coal gasification stage and many of the downstream components comprising a mix of imported and domestic technologies (see Chapter 6 Appendix on page 58). Subsequently, through the 11th and the 12th FYP (2011-2015), there was a cautious development of more complex coal-to-chemicals and coal-to-synfuels, with the State Government tightly controlling possible projects. This was due in part to high capital investment requirements and the uncertainty of forward oil prices suggesting potentially unattractive economic returns. It also ensured that the provincial governments didn’t initiate small inefficient projects with poor environmental performance, arising from a lack of national awareness. Alongside these initiatives, a major development was the push to establish a national CTL programme covering both the direct process and, at smaller scale, the indirect process.
During the 12th FYP period, there was a review of individual process streams established on operational plants, to determine those with acceptable efficiency and environmental performance characteristics. Those plants that did not meet those requirements were closed. In addition, the intention was to upgrade those demonstration projects that offered the higher energy conversion efficiency, a suitable geographical location with both adequate suitable coal supplies and sufficient water availability, as well as offering prospects for extending the industrial chain to promote local economic and social development. This included a focus on the construction of projects for clean production, utilisation, processing and conversion of low-calorific-value coal (Inside China, 2012). Large-scale operations were taken forward for coal-to-olefins (CTO), coal-to-mono-ethylene glycol (CTMEG), and coal-to-synthetic natural gas (CTSNG). At the same time, plans were developed to expand the CTL programme to achieve commercial scale capacity. There was also the initiation of small-scale activities to investigate the potential of further coal conversion processes (Minchener, 2013).
In February 2012, the Ministry of Industry & Information Technology published the Petrochemical & Chemical Industry overall 12th Five-Year Plan, together with specific plans for the olefin and fertiliser industries (Asiachem, 2013). This set out the need to actively promote advanced coal gasification and coal-based polygeneration processes; to further establish Chinese intellectual property rights; and to further improve the utilisation ratio of lower rank coal and other poor quality mineral species. In terms of targets, the plan suggested that coal/methanol to olefins should achieve at least 20% market penetration, displacing traditional naphtha-based conversion processes, while the proportion of nitro-fertiliser capacity using advanced gasification processes should reach 30% together, with the development of 450,000 t/y ammonia and 800,000 t/y urea (or higher capacity) process units.
The NDRC also published the Coal Industry 12-5 Developing Programme. This specifies that new coal-to-chemicals projects will be based in those areas of Inner Mongolia, Xinjiang, Shaanxi, Shanxi, Yunnan, and Guizhou Provinces that have both adequate quantities of suitable coal (see Figure 4) and water supplies necessary to support process upgrading future fuels projects for CTL, CTSNG, and various coal chemicals processes.
These trends continue with the 13th Five-Year Plan. The drivers include strengthening technological innovation to further develop deep coal processing to produce liquid and gaseous fuels with high amenity value. However, at the same time, there remains a focus on an increasing emphasis for rationally controlling the pace of development, a strict implementation of environmental access conditions and limiting associated market risk. There is also a need to ensure operational stability with high availability, including the assessment and, where possible, application of innovative approaches for organic integration of coal deep-processing, oil refining, petrochemical, and power production (Asiachem, 2017a).
This includes the steady advancement of demonstration projects while ensuring standards are met for energy efficiency, environmental protection, water saving, and the use of domestic produced equipment with Chinese intellectual property rights. Thus, new projects will only be permitted in regions with adequate water resources; they must be consistent with China's overall plans to control coal consumption, and with a need to prioritise the use of low-quality coals with high sulphur and ash content in order to reduce their use elsewhere. Efficiency targets for CTL plants include the use of a maximum of 3.7 tonnes of coal for each tonne of oil produced, while CTSNG projects must use no more than 2.3 tonnes coal for every 1000 m3 of gas produced.
Operational production capacity during the 13th Five-Year Plan for CTL has been set at 13 Mt/y while for CTSNG it is 17 billion m3/y (China Oil & Gas 2017).
Key future CTL projects have been identified as Shenhua Ningxia Coal Phase II, Ningxia; Shenhua Erdos 2nd & 3rd Lines, Inner Mongolia; Yankuang Yulin Phase II, Shaanxi; Ganquanpu, Xinjiang; Yili, Xinjiang; Yitai, Inner Mongolia; Bijie, Guizhou; Eastern Inner Mongolia. For coal-to-SNG, the key projects include Zhundong, Xinjiang; Yili, Xinjiang; Erdos, Inner Mongolia; Datong, Shanxi; Xing'an League, Inner Mongolia (Asiachem, 2017c). Only a few of these have proceeded so far beyond the concept and early design stage, as indicated in Section 3.3. There are also some coal polygeneration demonstration projects listed, which are at an early stage of development, including: Yanchang-YulinShenhua Coal-Oil-Power Poly-generation, Shaanxi; Shaanxi-Yulin Coal-Oil-Gas-Chemical Poly-generation; Longcheng Yulin Coal-Oil-Gas Poly-generation; Jiangneng Shenwu Pingxiang Coal-Power-Oil Poly-generation, Jiangxi.
These plans were robust but were affected significantly by external events such as the global financial crisis starting in 2008 and then, in 2014, there was a global collapse in the oil price, which led to a retrenchment of activities, both in terms of the operational programme and the progressing of new projects. The impact that this had on future fuel products, that is, hydrogen, methanol, dimethyl ether, synthetic gasoline/diesel and synthetic natural gas, is considered in Sections 3.3 to 3.7 below.
The 10 largest coal producers and exporters in the Indonesia:
- 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
