With global oil prices now lingering near historical highs, it is likely that China's first coal-to-liquid (CTL) project will begin operation before the previously projected date of 2016, according to South Africa's Sasol, the world pioneer in commercial CTL technology. It is planning two giant projects in China.

 

"Once we have completed our studies, we will consider shortening the period (before operations begin)," says Lean Strauss, Sasol Group general manager. "We will bring the date forward."

 

He didn't give a new timetable, but the company's Beijing office said earlier the two projects might come online in 2013.

 

The company and its Chinese partner China Shenhua Group are now in the second phase of feasibility studies for the two projects, one in Northwest China's Shaanxi Province and the other in the Ningxia Hui Autonomous Region.

 

Sasol began planning with Shenhua Group Co Ltd and Shenhua Ningxia Coal Ltd for the projects in 2004 and preliminary studies were finished at the end of 2005. According to earlier reports, the studies now underway will determine details of capital and feedstock costs, water supplies and market conditions, and will outline most of the major commercial and funding issues.

 

"China has the right conditions to become the second country in the world to develop CTL," Strauss says. Sasol commercialized CTL projects in its home country after building its first plant in 1955 and two more from the 1970s to the mid-1980s. Twenty-five percent of South African fuel is now derived from coal to power cars and airlines in the country.

 

"South Africa flies and drives on coal," Strauss says proudly.

 

Experts say that as world oil prices approach $100 a barrel, Sasol's projects look increasingly appealing to China, where coal is abundant and about half of oil consumed is imported from overseas.

 

The Chinese government has felt the pinch of soaring oil prices that climbed to more than $90 a barrel in November. Due to a price gap between the domestic and world oil markets, some major cities experienced gasoline shortages last month. The National Development and Reform Commission resorted to administrative measures to force China's two oil giants to meet the demand for gasoline.

 

Amid calls for China to build more strategic oil reserves to ensure energy security, Strauss believes China's coal reserves provide a significant strategic opportunity to improve both its energy security and self-sufficiency. The nation has about 1 trillion tons of explored coal reserves, ranking it third in the world.

 

But since they were first proposed, Sasol's projects in China have been controversial due to doubts about their energy efficiency and economic viability.

 

According to Strauss, the efficiency of coal to oil is around 40 percent with the remainder used to make other coal chemical products. The company is now researching how to improve efficiency.

 

Generally speaking, he says, at an oil price of $50 a barrel, the CTL process is commercially viable.

 

If oil is cheap, the CTL does not make economic sense, he says. But a growing thirst for oil and global competition for resources means CTL "is a strategic decision for a country to make".

 

Sasol's studies say that 15 CTL plants could replace almost 15 percent of China's fuel imports by 2020.

 

Its two projects are designed to produce 80,000 barrels of liquid fuel a day. Each plant is expected to cost $5 billion to $6 billion. Depending on coal quality, one CTL plant converts 13 to 19 million tons of coal annually.

 

(China Daily December 17, 2007)