Review and Outlook of China’s Coal Chemical Industry in 2013

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Review and Outlook of China’s Coal Chemical Industry in 2013: The demonstration projects that were successfully put into operation have proven the technical feasibility and economic competitiveness of coal chemistry. On this basis, in 2013 more new coal chemical industrialization projects received approval from the National Development and Reform Commission to carry out preliminary work; coal chemistry has thus become an important part of China’s energy and chemical industry. As a professional research institution in the coal chemical industry, Yaha Consulting will review the progress of China’s coal chemical industry in 2013 and look ahead to its future prospects. ——Coal-to-oil: Since the four pilot coal-to-oil projects operated by Shenhua, Yitai, Lu’an, and Jinneng achieved a production capacity of 1.47 million tons per year in 2010, industrial-scale coal-to-oil projects in China were in the construction phase from 2011 to 2013, with no new capacity added. In 2013, the 1 million tons per year coal-to-oil project at Yankuang Yulin, the 1.8 million tons per year coal-to-oil project at Lu’an Shanxi, the 4 million tons per year coal-to-oil project at Shenhua Ningxia, and the first phase of the 900,000 tons per year coal-to-oil project at Yitai Ili were rushed into construction, while other coal-to-oil projects were still in the preliminary planning stage. Starting in 2014, as commercial coal-to-oil plants were gradually built and put into operation, China’s coal-to-oil production capacity increased rapidly, reaching 16 million tons per year by 2016. In addition to the three approaches of direct coal-to-liquid oil (DCTL), indirect liquefaction via F-T synthesis (ICTL), and coal-based methanol to gasoline (MTG), coal kerosene blending is also a development direction for coal-to-oil production that deserves attention. By taking advantage of the good synergistic effect between lignite or young bituminous coal and refinery residue oil, the harshness of the reactions involved in the direct liquefaction of coal to produce oil can be significantly reduced. The 450,000 tons per year kerosene blending test and demonstration project of Yanchang Petroleum in Yulin, Shaanxi, commenced construction in April 2012, with an estimated investment of 1.79 billion yuan, and is expected to be completed by 2014. ——Olefin production from coal (methanol): By 2013, with the successive commissioning of the methanol-to-olefins projects operated by Ningbo Fude Energy Co., Ltd. (formerly Ningbo Heyuan Chemical Co., Ltd.) and Huisheng (Nanjing) Clean Energy Co., Ltd., China had 6 such facilities in operation, with a total production capacity of 2.76 million tons per year. Of this, the integrated coal-based olefin production capacity is 1.56 million tons per year, while olefin production from purchased methanol is 1.2 million tons per year. According to analysis by Yahuaxun Consulting, the total production capacity of all 55 coal (methanol)-to-olefins projects in China that were in operation, in the testing phase, under construction, or in the preliminary stages in 2013 was expected to reach 23.65 million tons per year by 2018. Of this amount, PE and PP would account for 35% and 47% respectively, while 18% of the ethylene and propylene produced would be used to manufacture other chemicals. The projected capacity growth of coal (methanol)-based olefin production projects in China from 2013 to 2018 is shown in the figure below. Due to the additional 3.18 million tons per year of methanol consumption resulting from the projects for producing olefins from purchased methanol during 2012–2013, as well as maintenance work on some methanol production facilities that relied on imported methanol, methanol prices in the East China region rose temporarily from 2,500 yuan per ton to 4,000 yuan per ton in the second half of 2013. Although these prices dropped back to 3,200 yuan per ton by the end of the year, they remained close to the upper limit considered acceptable for using purchased methanol in olefin production. Although China had an excess methanol production capacity of over 20 million tons in 2013, since methanol is a liquid chemical with high transportation costs and limited shipping capacity, much of this costly production capacity could only be sold in nearby areas, as it was not feasible to transport it over long distances to consumer markets. Therefore, there will be periodic shortages of methanol supply in areas where MTO/MTP projects are concentrated, such as the southeastern coastal regions (Jiangsu, Zhejiang) and the Ordos region. It is expected that in the coming years, methanol producers with lower costs and convenient transportation conditions will see a significant improvement in their profitability. ——Coal-to-natural gas: Coal-to-natural gas projects finally entered commercial operation in 2013. On December 18, a series of facilities with an annual capacity of 1.33 billion cubic meters each at the Datang Inner Mongolia Keqi Coal-to-Natural Gas Pilot Project were put into operation, beginning to supply gas to the PetroChina Beijing pipeline network. On December 28, the 1.375 billion cubic meters per year coal-to-gas plant in the first phase of Qinghua Xinjiang Ili began supplying gas to the PetroChina Yihuo branch line. In 2013, the actual coal-to-gas production capacity in China came to 2.7 billion cubic meters per year from two projects; among them, the settlement price for the Datang Keqi project, at 2.75 yuan per cubic meter including taxes, was particularly notable. In April 2013, the project of Sinopec Xinjiang Energy and Chemical Company was launched. According to data from Yahuazheng Consulting, Sinopec holds 14.8 billion tons of coal resources in Zhundong, Xinjiang, and plans to build two coal mines with an annual production capacity of 15 million tons each, as well as a coal-to-natural gas project with an annual output of 8 billion cubic meters. Sinopec has planned two coal-to-natural gas pipelines with an annual transport capacity of 30 billion cubic meters each; the Xin Yue Zhe coal-to-natural gas pipeline has already received approval from the National Development and Reform Commission. In 2013, numerous coal-to-gas projects received approval from the National Development and Reform Commission, allowing them to proceed with preliminary work; these projects were mainly located in Inner Mongolia and Xinjiang. The construction of Sinopec’s coal-to-gas pipeline in Xinjiang will solve the product transportation issue for coal-to-gas projects in Zhundong, Xinjiang, while the coal-to-gas projects in Yili region of Xinjiang will mainly feed into CNPC’s West-East Gas Transmission pipeline. As coal-to-gas projects progress through the construction and preparatory phases, Yaha Consulting estimates that by 2016 and 2020, China will have coal-to-gas production capacities of 20 billion cubic meters per year and 110 billion cubic meters per year, respectively. ——Production of ethylene glycol from coal (syngas): In 2013, China’s projects for producing ethylene glycol using the oxalate route based on syngas had an installed capacity of 900,000 tons per year. The average operating load of most of these facilities was less than 80%; only the 50,000-ton-per-year ethylene glycol production facility at Xinjiang Tianye, which utilizes exhaust gas from calcium carbide furnaces, operated at a load of over 90%, with a quality rate for high-grade ethylene glycol exceeding 92%. Xinjiang Tianye is building a second phase with an annual production capacity of 200,000 tons of ethylene glycol, with commissioning planned for 2014. After more than two years of effort, coal-based ethylene glycol is gradually being accepted by the downstream polyester fiber industry. In September 2013, a large polyester fiber manufacturer in Zhejiang announced that it was already using coal-based ethylene glycol on a commercial scale in polyester production, mixing it into petrochemical-derived ethylene glycol at a ratio of around 30%. It is expected that in 2014, the main developers of coal-based ethylene glycol technologies and the demonstration projects in China will continue to work to increase the operational capacity of their facilities and the quality of their products, in order to gain greater recognition within the polyester fiber industry. The 200,000 tons per year industrial demonstration plant for producing ethylene glycol from syngas at Sinopec Hubei Fertilizer Branch was handed over in November 2013, utilizing Sinopec’s own technology for converting syngas into ethylene glycol. The operational performance and product quality of Sinopec’s coal-based ethylene glycol production are worth paying attention to. In October 2013, Eastman Chemical Company announced that it had developed, in collaboration with JM David Co., Ltd., an advanced patented technology for producing ethylene glycol from syngas, a technology that does not involve oxalic acid intermediates. At present, the large-scale pilot plant for this new technology is nearing completion, and negotiations are underway for the first demonstration unit. ——Ethanol from coal: In 2013, ethanol produced from coal also attracted attention within the coal chemical industry. There are mainly four technical routes for producing ethanol from coal: 1. microbial fermentation of syngas, 2. direct hydrogenation of acetic acid, 3. esterification-hydrogenation of acetic acid, 4. catalytic synthesis of ethanol from syngas. The process of producing ethanol from acetic acid via hydrogenation is the most mature. In August 2013, CNPC Group and Celanese Corporation signed a memorandum of understanding on cooperation to promote the use of synthetic fuel ethanol. The two companies will work together to use Seralis’ patented TCX ethanol process technology to develop synthetic fuel ethanol in China. According to Yahua Consulting’s research, for coal-based ethanol to achieve true large-scale commercial development, the issue of \"fuel ethanol production licenses\" must be resolved. Only with a license can the product be sold to CNPC and Sinopec as fuel ethanol; otherwise, it can only be sold as industrial ethanol. Furthermore, if subsidies and tax incentives are not available, it is worth considering whether coal-based ethanol has a cost advantage over grain ethanol/cellulose ethanol. ——Coal-to-aromatics (PX): In March 2013, a 10,000-ton-per-year industrial test plant for methanol-to-aromatics, developed jointly by Huadian Group and Tsinghua University, was successfully put into operation in Yulin, Shaanxi. This technology utilizes a fluidized-bed reactor and a self-developed modified molecular sieve catalyst; the reaction processes include the conversion of methanol into aromatics, the aromatization of light hydrocarbons, and the alkylation of benzene, toluene, and methanol. The analysis showed that the one-way conversion rate of methanol was 99.99%, the total yield of hydrocarbons from methanol to aromatics was approximately 75%, 3.07 tons of methanol were required per ton of aromatics, and the catalyst consumption was 0.20 kg per ton of methanol. HuanDian is planning to build the world’s first industrial demonstration plant for producing aromatics from methanol on a scale of one million tons in the coal chemical industry base in Yulin, Shaanxi. By then, the facility will have an annual production capacity of 10 million tons of coal, 3 million tons of coal-to-methanol, 1 million tons of methanol-to-aromatics, and 1.2 million tons of purified terephthalic acid (PTA). ——Hydrogen production from coal: Hydrogen production using coal/petcoke is an emerging option as a source of hydrogen for refineries. In recent years, refineries in cities such as Maoming, Zibo, Jiujiang, Nanjing, and Anqing in China have built a series of large-scale coal-to-hydrogen plants. Reliance India and CNOOC will also build world-class coal/oil coke gasification cogeneration projects in Jamnagar, India, and Huizhou, Guangdong, respectively, to produce electricity, hydrogen, and high-pressure steam. When there is a high demand for hydrogen and natural gas prices are high, coal-based hydrogen is more economical. With high prices for oil and natural gas, while coal prices remain relatively stable, large-scale gasification for hydrogen production not only offers cost advantages but also helps to optimize the material balance in refineries; it has thus become an important direction for hydrogen production in Chinese refineries. Yahua Consulting believes that as more commercial-scale facilities come online and production capacity increases, in addition to ammonia synthesis, methanol, and acetic acid, coal chemistry will play an important role in the production of olefins, ethylene glycol, natural gas, hydrogen, and aromatics in the future.