China’s expansive coal-to-liquids program may be doomed

Decisions by China’s National Development and Reform Commission and State Council may bring the country’s fast-moving and expansive coal-to-liquid program to a rapid halt.

RENO, NV - 

China's National Development and Reform Commission (NDRC) has called for ending the nation's coal-to-liquid (CTL) projects, while an official Beijing paper reported Sunday that China's State Council has decided to restrict CTL programs.

Quoting a deputy director of the NDRC, who declined to be named, official news agency Xinhua said the liquefied coal projects consume too much energy.

The capital demand costs and higher consumption of water for liquefied coal fuels production has long worried the NDRC, which warned last year about the environmental consequences of the development of synthetic oil and chemical claims. The commission claimed CTL projects would consume tens of millions of cubic meters of water yearly.

The Beijing Youth Daily Sunday said that China's cabinet, the State Council, has approved in principle a" long-term renewable energy development plan" which calls for restrictions on the domestic CTL and ethanol industries.

During a seminar in Beijing Saturday, the NDRC official cited a project in Mongolia which a designed CTL capacity of 1.08 million tons would require more than 50 billion yuan (US$6.58 billion) in investment. He sad the nation had begun CTL projects without first performing adequate trials, and that the technologies were not yet sophisticated.

China's largest coal company Shenhua Group plans to begin production from the nation's first CTL plant, with a capex of $1.5 billion in Mongolia this year or in early 2008. Shenhua's plant uses the Bergius process or direct liquefaction. Direct liquification produces more fuel per ton than Fischer-Tropsch.

State-owned Shenhua plans to pump 20,00bpd of synthetic oil.  Shenhua hopes to operate eight liquefaction facilities by 2030 to yield a total of more than 30 million tons annually.

China's second largest coal miner, the Yankuang coal group is planned a CTL plant near the Shenhua facility, using the Fischer-Tropsch process with a proprietary gasifier and catalyst.

However, China's Coal Research Institute said Shenhua's facility will consume 360 gallons of water for every barrel of oil producer.

Both Shenhua and the Yankuang CTL projects are located in Erdos, a desert municipality in the Inner Mongolia Autonomous Region, with a serious absence of water supplies that are already allocated to population growth and existing power facilities. One of Shenhua's competitors acknowledged earlier this year that "water is the key factor" to develop China's CTL industry.

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