Building two large-scale coal-to-oil projects simultaneously carries significant risks; Inner Mongolia Yitai plans to suspend its 2 million tons per year coal indirect liquefaction demonstration project

Thread Content

Recently, Inner Mongolia Yitai Coal Co., Ltd. plans to suspend the development of the 2 million tons per year coal indirect liquefaction demonstration project operated by Inner Mongolia Yitai Coal-to-Oil Co., Ltd. As of December 31, 2024, the actual investment amount was 810 million yuan. Inner Mongolia Yitai Coal-to-Oil Co., Ltd. was established on March 17, 2006, by Inner Mongolia Yitai Coal Co., Ltd. and Inner Mongolia Yitai Group Co., Ltd., with a registered capital of 2.353 billion yuan. Inner Mongolia Yitai Coal Co., Ltd. holds 90.5% of the shares in the coal-to-oil company, while the Yitai Group holds 9.5% of those shares. Plans disclosed earlier indicate that the total investment for this project is estimated to be around 29.342 billion yuan. The site selected for the project is located in the western part of the area used for the first phase of the project, covering a total area of 288.18 hectares; it is part of the South Industrial Zone in Dali Industrial Park, Zhungeer Banner, Ordos City, Inner Mongolia Autonomous Region. The project’s technology and scale are as follows: the project plans to utilize high-temperature F-T synthesis technology, based on the technical solutions provided by Beijing Zhongke Synthetic Oil Technology Co., Ltd., with China Tianchen Engineering Co., Ltd. serving as the project contractor. The annual production capacity is over 2 million tons of petroleum products; the main products include 1.44 million tons of diesel, 400,000 tons of naphtha, 160,000 tons of LPG, and 100,000 tons of LNG, with by-products such as mixed alcohols and sulfur. Project progress: On December 16, 2013, the **National Development and Reform Commission approved the preliminary work for this project via Document No. Nengyuan 3054 issued by its Development and Reform Office. In 2015, the Office of the National Development and Reform Commission issued the document titled \"Opinions on the Review of the Energy Conservation Assessment Report for the 2 million tons per year coal indirect liquefaction demonstration project of Inner Mongolia Yitai Coal-to-Oil Co., Ltd.\" (Document No. Fa Gai Ban Huan Zi 2659), stating that the project had, in principle, passed the review of its energy conservation assessment report. In July 2016, the project received the approval from the Ministry of Environmental Protection of the People’s Republic of China, in the form of Document No. Huan Shen 95, regarding the Environmental Impact Assessment Report for the 2 million tons per year coal indirect liquefaction demonstration project carried out by Inner Mongolia Yitai Coal-to-Oil Co., Ltd. In December 2016, the project received the approval document titled \"Approval by the National Development and Reform Commission for the 2 million tons per year coal indirect liquefaction demonstration project of Inner Mongolia Yitai Coal-to-Oil Co., Ltd.\" (Document No. Fa Gai Neng Yuan 2540). On January 16, 2025, progress was halted. Regarding the reasons for halting the progress of the project, Yitai’s B-share listing stated in a announcement that, in line with its strategic plans, Inner Mongolia Yitai Coal Co., Ltd. has planned coal-to-oil projects in both Inner Mongolia and Xinjiang – namely, a 2-million-ton coal-to-oil project in Inner Mongolia and a 1-million-ton per year coal-to-oil demonstration project operated by Yitai Ili Energy Co., Ltd. in Xinjiang. In 2024, the average price of domestic thermal coal continued to decline as a whole. Entering the fourth quarter, coal prices showed a clear downward trend, with the average price of Q5500 coal shipped from ports in the north dropping by about 100 yuan per ton. As the company’s core business, a rapid decline in coal prices will lead to a significant drop in the company’s profits. Given the unsustainability of high coal price levels, it is possible that coal prices will continue to fall. The total investment for the two planned coal-to-oil projects is expected to be nearly 50 billion yuan, and there are significant economic risks associated with building two large-scale coal-to-oil projects at the same time. Due to the slow progress of the 2000,000-ton project, the allocated water quota from the Yellow River remained unused for a long time. On July 26, 2024, the Water Resources Bureau of Ordos issued a notice titled \"Notice on Designating the Unused Water Quota for Inner Mongolia Yitai Coal-to-Oil Co., Ltd.’s 2000,000 tons per year coal indirect liquefaction demonstration project,\" and the water quota allocated to that project was reclaimed. In the future, it is not ruled out that the total pollutant emission levels (including particulate matter, sulfur dioxide, nitrogen oxides, and volatile organic compounds) for which environmental impact assessment reports have been approved, as well as the overall energy consumption targets specified in energy conservation assessment reports that have been approved, may be revoked one after another. Based on the above analysis, Inner Mongolia Yitai Coal Co., Ltd. plans to suspend the progress of the 2-million-ton coal indirect liquefaction demonstration project of the coal-to-oil company. It is also understood that in addition to the project in Inner Mongolia, the other coal-to-oil project mentioned in the announcement is the 1 million tons per year coal-to-oil demonstration project in Ili, Xinjiang. This project is located in the Yitai Ili Industrial Park, in Chabuchar Xibe Autonomous County, Ili Kazakh Autonomous Prefecture, Xinjiang Uygur Autonomous Region, with a planned total investment of 16.068 billion yuan. A statement released by Yitai in February 2023 said that it had decided to postpone the construction. As of December 31, 2024, the actual investment in the Yili project in Xinjiang amounted to 6.811 billion yuan.