Chinese coal enterprises have made strides in coal to liquids (CTL) projects, using both direct and indirect methods, despite difficulties in the market and policy environments.
The pressures they face include sharply lower oil prices and a surge in coal prices, which together can change the economic environment of many projects, and policy changes at the national level.
The latest success story took place in North China's Inner Mongolia. On March 23, Yitai Group announced a successful test run with its 160,000-tonne indirect CTL facility, producing quality diesel oil and naphtha.
Based in Jungar Banner, Inner Mongolia, Yitai Group has an annual output of 100 million tonnes of coal. Its CTL project was approved by the central government in 2005 and began construction in 2006, with an investment of nearly 2.7 billion yuan (395 million U.S. dollars).
"The Yitai facility is China's first industrial-scale CTL line and it means China has made substantial progress in independent industrialization of coal to oil using the indirect method," said Li Yongwang, chief scientist of the coal-to-oil task force of the Shanxi Coal Chemical Research Institute (SCCRI), under the Chinese Academy of Sciences (CAS).
Direct coal-to-oil production involves mixing heavy oil with coal to produce coal slurry and converting that mix into diesel oil and other products via hydrocracking. China's Shenhua Group was the first in the world to achieve industrial-scale direct production.
The indirect technique requires gasifying and purifying the coal, then adding activators to synthesize diesel oil and naphtha. Yitai uses this type of technology, as does Lu'an Mining Group.
Before Yitai's project took off, Shenhua -- China's top coal producer -- conducted trial operations of a 1 million-tonne direct CTL production line on Dec. 31, producing quality diesel, naphtha and oil. This trial run made China the only country in the world to have achieved key technologies for 1 million-tonne-scale direct CTL production.
The trial ended after 300 hours, but Shenhua is making improvements so it can conduct a 1,000-hour trial next month.
As a key component of the national energy strategy, the Shenhua direct CTL project, also based in coal-rich Inner Mongolia, officially kicked off in May 2005.
Also, on Dec. 22, north China's Shanxi Lu'an Mining Group successfully experimented with a small-scale indirect CTL facility, developed by SCCRI. It will conduct a trial of its 160,000-tonne indirect CTL facility in the near future.
NEW LIQUID ENERGY SOURCES
Coal accounts for more than 70 percent of the energy mix in China, which has abundant coal reserves but poor oil and natural gas resources.
Over the past five decades, China has tapped several large oilfields, such as Daqing and Shengli. But discoveries and production can't keep up with demand. With rapid economic growth, China became a net oil importer in 1992 and has increased oil imports every year since.
According to Liu Keyu, vice president of the China Petroleum Economy and Technology Research Institute, China's oil consumption reached 389.3 million tonnes in 2008, up 5.1 percent from the previous year. But during 2008, net oil imports approached 200 million tonnes, up 9.2 percent.
Thus, a little more than one half of oil consumed had to be imported.
Liu warned that China, which was expected to continue raising its oil imports, would meet increasingly tough energy-security challenges.
High and volatile prices are among those challenges. During the four years before the financial crisis erupted with full force in late 2008, world crude prices soared. Prices reached a record high of 147.27 U.S. dollars per barrel on July 11, 2008. These high prices meant that many areas of the country lacked enough oil.
