Coal-to-methanol projects will have further room for development

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:Victory: The National Development and Reform Commission, the Energy Administration, the Ministry of Industry and Information Technology, and other agencies are working together to develop a \"Plan for Demonstration Projects in Advanced Coal Processing.\" This document is seen by the market as the 12th Five-Year Plan for the coal chemical industry. It is understood that, unlike the general bans issued by the National Development and Reform Commission in previous years, this document will bring hope to both local authorities and the market. According to people familiar with the matter, in addition to coal-to-oil, coal-to-dimethyl ether, and coal-to-methanol, the plans under development will open up clearer pathways for coal-to-ammonia production as well as coal-to-natural gas production in certain regions. At the same time, coal-based methanol will be directed toward chemical products such as olefins. This will not only provide further room for the development of existing coal-to-methanol projects, but also offer investment opportunities for areas that possess coal resources and downstream demand. It is understood that, depending on the area of responsibility, the leading agency for the aforementioned plans is the **National Development and Reform Commission**; the Ministry of Industry and Information Technology is responsible for the project planning related to coal-based methanol, coal-based olefins, and coal-based synthetic ammonia, while the **Energy Administration** is in charge of the project planning for energy products such as coal-based oil, coal-based natural gas, and coal-based dimethyl ether. Officials from the relevant departments said, \"The document under preparation is referred to as a pilot project plan, which clearly indicates that in the next three to five years, the coal chemical industry will primarily focus on experimentation.\" Due to the huge investment required, high energy consumption, and numerous challenges in terms of technology and business, widespread adoption at the local level will not be permitted any time soon. ” Li Baoqing, a researcher at the **Key Laboratory of Coal Conversion** at the Shanxi Institute of Coal Chemistry, Chinese Academy of Sciences, said that the coal chemical industry is still in the pilot stage worldwide, and it is not possible to allow China to serve as a testing ground for the entire world – the cost of that would be extremely high. The \"Plan for Demonstration Projects of Advanced Coal Processing\" is derived from the \"Medium- and Long-Term Development Plan for the Coal Chemical Industry\" drafted by the **National Development and Reform Commission in 2006\"; this plan had been under discussion for over three years. But it still failed due to significant controversy. Those who were involved in the formulation of the medium- to long-term plans at that time said that the plans specified that coal chemical projects should be limited to the seven provinces with abundant coal resources, namely Shanxi, Shaanxi, Inner Mongolia, and Xinjiang, and it was planned to establish eight major coal chemical industry bases across the country starting in 2011. This caused great dissatisfaction in other places. In addition, departments such as the Ministry of Industry and Information Technology, which joined in the planning process later on, hoped that, in accordance with the principles of the relevant regulatory framework, the authority to approve certain coal chemical projects would be transferred from the National Development and Reform Commission to industry regulatory agencies such as the Ministry of Industry and Information Technology and the Energy Bureau. On the other hand, the local authorities argue that granting approval powers for such projects goes against the direction of investment system reform, and suggest that the approval authority for coal chemical projects should be directly delegated. The outcome of the debates surrounding coal chemical projects is that the authority to approve such projects is determined by the scale of investment: larger projects remain subject to approval or registration by the **Development and Reform Commission, while some approval powers have been delegated to local authorities. The **Energy Bureau and the Ministry of Industry and Information Technology carry out relevant industry planning and guidance tasks in accordance with their respective responsibilities. It is understood that, in accordance with the \"Plan for Demonstration Projects of Advanced Coal Processing\" jointly formulated by the three relevant departments, areas facing water shortages will be restricted from launching coal chemical projects first, while regions that receive coal imports will also see strict controls on the development of the coal chemical industry. It will also be stipulated that for new coal chemical projects, the costs from coal to the final product as well as the conversion efficiency must be carefully calculated; coal prices shall be based on market rates, and such new projects must also incorporate certain carbon reduction measures. The new plan encourages larger and longer-chain coal chemical projects. It is required that the coal chemical industry operate in industrial parks, located in areas with sufficient coal and water resources ； Enterprises and localities that embark on coal chemical industry must have funds, technology, and resources. In principle, when a company undertakes a demonstration project, regions where the development of coal chemical industries is permitted also have strict quantitative limits on products and demonstration projects. After the project is completed, strict assessment, acceptance, and summary are required. To this end, in April of this year, the Industry Department of the **National Development and Reform Commission** and the Science and Technology Department of the **Energy Administration** held a symposium in Beijing on the development of the coal chemical industry during the 12th Five-Year Plan period, with more than 20 organizations and enterprises participating in the discussion. In conclusion, it is necessary to develop coal chemical industry to a moderate extent, but it needs to be developed in an orderly and regulated manner. On March 21, 2011, the **National Development and Reform Commission issued a notice titled \"On Regulating the Orderly Development of the Coal Chemical Industry,\" which stipulated that, pending the introduction of new policies, the construction of projects for producing olefins from coal via methanol on a scale of 500,000 tons per year or less, projects for producing methanol from coal on a scale of 1 million tons per year or less, projects for producing dimethyl ether from coal on a scale of 1 million tons per year or less, projects for producing oil from coal on a scale of 1 million tons per year or less, projects for producing coal-based natural gas on a scale of 2 billion cubic meters per year or less, and projects for producing ethylene glycol from coal on a scale of 200,000 tons per year or less were prohibited. It was also stated that large-scale coal processing and conversion projects exceeding the aforementioned standards must be approved by the **Development and Reform Commission. However, the wave of local investment driven by the concept of new coal chemical industries seems to be turning the aforementioned notice into nothing but empty words. According to statistics, there are currently around 30 new coal chemical projects under construction in China, with a total investment of over 80 billion yuan. Of these, the additional production capacity for methanol is 8.5 million tons, for dimethyl ether it is 900,000 tons, for olefins it is 1 million tons, and for coal-to-oil production it is 1.24 million tons. These new coal chemical projects require investments in the tens of billions, but not every large-scale project has been approved by the **Development and Reform Commission. By the end of June this year, the Shenhua Ningmei coal-to-olefins project, which uses Siemens equipment, will undergo acceptance testing after being in operation for over 3 months; the relevant reports will be submitted to the **National Development and Reform Commission. This is one of the few coal chemical demonstration projects that have received approval from the **National Development and Reform Commission at present. It is hoped that the project will first serve as a model before considering its expansion. However, the regions with a strong desire to invest in coal chemical industries **can no longer wait for the results of these demonstrations. Some time ago, Siemens delivered two sets of coal chemical equipment to Jincheng, Shanxi, where the local Lanhua Group plans to use them to launch a coal chemical project involving the production of 300,000 tons of synthetic ammonia and 520,000 tons of urea – although these projects have not yet received approval from the National Development and Reform Commission. Now, to cater to local investment enthusiasm, the equipment manufacturing giant Siemens focuses on promoting large-scale coal chemical processing equipment in China, and no longer offers those smaller devices. Liu Yun, a equipment engineer at Siemens Gesselfeld Gasification Technology, said that **in the next step, large-scale coal chemical projects will be given priority support, while competition in the field of related technologies and equipment for small-scale coal chemical projects is already very fierce. Currently, many regions are in talks with Siemens regarding coal chemical projects, most of which are located in the western regions represented by Xinjiang. The relevant technologies held by the Clean Coal Technology Institute at East China University of Science and Technology are among those that are most maturely applied in China’s coal chemical industry at present. Zhou Zhijie, a researcher at the institute, said that there are already 23 coal chemical projects in China that have adopted their technology, of which 8 are already in operation. The minimum investment amount for these coal chemical projects is over 2 billion yuan. Coal chemical projects have been launched in places ranging from Xinjiang and Inner Mongolia to Anhui and Shandong, as well as in Jiangsu and Zhejiang. According to information held by the **National Development and Reform Commission, there is currently a severe overcapacity for some coal chemical products. Among them, the operating rate of methanol plants across the country is only around 50%, and dimethyl ether plants are also largely idle; a considerable number of enterprises are facing bankruptcy. The newly launched coal chemical projects are no longer focused on coal-to-oil, coal-to-dimethyl ether, and simple coal-to-methanol processes; instead, they have shifted towards coal-to-olefins, coal-to-natural gas, and synthetic ammonia. Zhou Zhijie, a researcher at the Clean Coal Technology Institute of East China University of Science and Technology, said that based on the current situation, the development of coal-to-olefins and coal-to-natural gas industries is likely to be a major area supported by policy incentives in the future. Among them, coal-to-natural gas may be subject to regional restrictions, while coal-to-olefins are less likely to face such restrictions. Zhou Zhijie believes that more coal-to-oil projects will not be allowed to be launched in the future, as such projects require larger investments and are also more vulnerable to fluctuations in oil prices. The coal-to-oil project piloted by Shenhua, despite having been in operation for several years, has not yet achieved commercial success. Li Baoqing, a researcher at the **Key Laboratory of Coal Conversion** at the Shanxi Institute of Coal Chemistry, Chinese Academy of Sciences, also agrees with the above view. He said that coal chemical industry is still in the demonstration phase, and it is hoped that after these demonstration projects have been operating for a while, their experiences can be summarized and disseminated. Zhou Zhijie also said that, at present, coal-based methanol production seems to be in excess, but **incentives for downstream chemical products such as olefins will help to consume this methanol. Since methanol is an intermediate product in the production of olefins from coal, encouraging the development of olefins is essentially equivalent to encouraging the production of methanol from coal.