Current status of coal-to-oil development in China: Production capacity has increased by 214.3% since the beginning of the 13th Five-Year Plan period

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China’s overall energy profile is characterized by abundant coal, limited oil reserves, and available natural gas. Coal is the primary fuel for power generation in China, and due to the country’s shortage of oil resources, coal-to-oil conversion has become an important trend in its energy strategy. In 2011, China succeeded in developing coal-to-oil technology with independent intellectual property rights, breaking free from the situation of being dependent on others. Since then, coal-to-oil projects in China have begun to develop rapidly. According to statistics from the Coal Chemicals Committee of the China Petroleum and Chemical Industry Federation, as of the end of September this year, China’s coal-to-oil production capacity stood at 9.21 million tons, representing a 214.3% increase since the beginning of the 13th Five-Year Plan period. Environmental friendliness is one of the key features of coal-to-oil projects. Under environmental protection policies, relevant enterprises continue to strive to reduce energy consumption, water consumption, and the emissions of various waste materials. Currently, the water consumption per ton of oil produced in the coal direct liquefaction demonstration project has dropped from the designed value of 10 tons to 5.82 tons ； Its water consumption per 10,000 yuan of industrial added value is 17.8 tons per 10,000 yuan, which is far lower than the national average of 68.2 tons per 10,000 yuan for the industrial sector. However, since coal-to-oil production is subject to the influence of both coal prices and oil prices, the high levels of both in China over recent years have made it difficult for such projects to be profitable. However, since the beginning of this year, international oil prices have gradually risen amid global geopolitical trends. The modern coal chemical industry as a whole has shown steady improvement in its performance, with coal-to-oil production starting to turn profitable. Companies such as Shenmu Tianyuan Chemical Co., Ltd., which has a coal tar hydrogenation capacity of 500,000 tons per year, achieved a profit of 190 million yuan in 2017; since the beginning of this year, driven by the steady rise in oil prices, its monthly profits have reached over 40 million yuan each month ； Shenmu Fuyou Energy Technology Company, which has completed its capacity expansion upgrades, is also expected to turn a profit this year. It is generally believed that coal-to-oil production can reach its break-even point when international oil prices remain between $50 and $60 per barrel; the higher the oil prices, the greater the profit margin for companies. However, another factor that restricts the profitability of coal-to-oil production is the high tax burden. At the current tax rates, taking into account the current costs and prices of coal-to-oil production, if a company produces oil products exclusively and complies fully with its tax obligations, it will incur a loss of 1,500 to 2,000 yuan per ton of product produced. Previously across the country, several officials from coal companies called for the tax policy on consumption to be improved as soon as possible in order to stabilize the development of the coal-to-oil industry. For the future development of coal-to-oil projects in China, scientific research and innovation are of paramount importance. **Wang Siqiang, director of the Department of Energy Conservation and Scientific and Technical Equipment at the National Energy Administration, said at the 2018 China International Coal Chemicals Development Forum held recently that in the future, direct coal liquefaction will focus on the production of aviation fuel and special kerosene ； Indirect coal liquefaction will serve as a means to expand into downstream industries, achieve diversified development, and promote co-production between them. It is worth mentioning that recently, researchers from the Beijing Institute of Low-Carbon Clean Energy in China, in collaboration with institutions such as Eindhoven University of Technology in the Netherlands, have developed a new type of catalyst that can significantly reduce the costs associated with the indirect liquefaction of coal, opening up new possibilities for capturing and utilizing the carbon dioxide generated during this process. It is reported that this research was supported by the key R&D program “Development of Advanced Coal Indirect Liquefaction and Product Processing Technologies,” which is undertaken by China’s **Energy Group**.