New 1.8 million tons per year methanol and 600,000 tons per year DMTO project at Shaanxi Yanchang China Coal Yulin

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On May 23, 2017, the Shaanxi Provincial Environmental Protection Department accepted the environmental impact report (form) for the completion project of the first phase of the comprehensive utilization of coal, oil, and gas resources in the Jingbian Energy and Chemical Park operated by Shaanxi Yanchang Zhongmei Yulin Energy and Chemical Co., Ltd., and made it public. Public display period: May 23, 2017 -- June 6, 2017. Basic Information on the Proposed Project: Project Name: Phase I Launch Project for the Comprehensive Utilization of Coal, Oil, and Gas Resources in the Jingbian Energy and Chemical Park – Landfilling and Rectification Works ； Project nature: Renovation and expansion ； Construction unit: Shaanxi Yanchang Zhongmei Yulin Energy Chemical Co., Ltd ； Construction location: Jingbian Energy, Chemical and Comprehensive Utilization Industrial Park, Jingbian County, Yulin, Shaanxi ； Construction contents: Construction of a new methanol production facility with an annual capacity of 1.8 million tons, utilizing both coal and associated gas from oil fields (with a ratio of about 1:2 between methanol produced from gasification of coal and that produced from the conversion of associated gas, equivalent to 600,000 tons per year of methanol from coal and 1.2 million tons per year from oil field associated gas); a 600,000-ton-per-year DMTO facility for converting methanol into olefins; a 300,000-ton-per-year polypropylene (PP) facility; a 300,000-ton-per-year low-density polyethylene/ethylene-vinyl acetate copolymer (LDPE/EVA) facility; two high-temperature and high-pressure coal powder heating boilers with a capacity of 320 t/h each; as well as the accompanying auxiliary infrastructure. This project is a renovation and expansion project, to be constructed within the existing plant area and the reserved land on the west side. Once completed, the project will fill the gap in raw materials for the polyethylene and polypropylene plants of the first-phase startup project; at the same time, the operational load of auxiliary facilities such as the coal storage and transportation system, water treatment stations, air compression stations, chemical storage areas, and acid-base stations will generally reach the designed levels. Total project investment: 14.005 billion yuan, of which the investment in environmental protection amounts to approximately 868.28 million yuan, accounting for 6.20% of the total investment. Technical Introduction: The coal-to-syngas unit in this project utilizes a pressurized water-coal slurry gasification process. The oil field gas conversion unit employs a single-stage steam reforming process to convert oil field gas into CO+H2. Methanol synthesis is carried out using the Davy process, while the conversion of methanol into olefins uses China’s own DMTO process. The LDPE/EVA units employ the Basell process developed by Germany’s BASF company, and the polypropylene (PP) units use Basell’s Spheripol polypropylene process. Project Background: In 2007, Shaanxi Yanchang Petroleum (Group) Co., Ltd. (which was later renamed Shaanxi Yanchang Zhongmei Yulin Energy and Chemical Co., Ltd. as the project owner) planned to develop integrated projects for the utilization of oil, coal, and chemicals in the Jingbian Chemical Comprehensive Utilization Industrial Park (the first phase of the Jingbian Energy and Chemical Park). In 2007, the Shaanxi Provincial Development and Reform Commission approved the registration of a methanol production project with an annual capacity of 3 million tons (with the first phase having an capacity of 1.5 million tons per year) (Document No. Shaanxi Development and Reform Energy 1295) ； In May 2008, the Shaanxi Provincial Development and Reform Commission approved the registration of the 1.5 million tons per year heavy residue thermal cracking and comprehensive utilization of downstream products project (Document No. Shan Fa Gai Shi Hua 615). The main construction components include a 1.5 million tons per year coal-to-methanol plant, a 1.5 million tons per year heavy residue thermal cracking (DCC) plant, a 500,000 tons per year methanol-to-olefins (DMTO) plant; together these facilities will produce 540,000 tons per year of polyethylene (PE) and 450,000 tons per year of polypropylene (PP). Utility systems and auxiliary facilities will also be constructed as part of this project. In November 2008, the former Shaanxi Provincial Environmental Protection Bureau approved the environmental impact assessment document for this project (Shaanxi Environmental Approval No. 605). Given the improvement in the collection and transportation capabilities for the associated gas from the Jingbian County oil field, and in order to make further use of this associated gas resource, the project developer proposed adjusting the raw material supply plan in order to achieve comprehensive utilization of the resources. This proposal was approved by the Shaanxi Provincial Development and Reform Commission (Document No. Shan Fa Gai Shi Hua 169). The main components of the project have been adjusted to include the production of methanol from 1.8 million tons per year of coal and associated gas from the oil field, 600,000 tons per year of DMTO, 1.5 million tons per year of DCC, 600,000 tons per year of PE, and 600,000 tons per year of PP; in addition, utility systems and auxiliary facilities will also be constructed as part of this project. In December 2009, the Shaanxi Provincial Environmental Protection Department approved the revised environmental impact assessment report for the project (Document No. Shaanxi Huan Han 838). Subsequently, the Shaanxi Provincial Environmental Protection Department issued a letter confirming the other adjustments to the project that did not constitute major changes (Shaanxi Environmental Protection Letter No. 467). In December 2015, the Shaanxi Provincial Department of Environmental Protection organized an on-site inspection to assess the environmental conditions following the completion of the project. In August 2016, the department approved the project as meeting the environmental requirements for completion (Approval No. 425 issued by the Shaanxi Provincial Department of Environmental Protection). Since the project launched in the first phase was the world’s first integrated facility for the comprehensive utilization of oil, gas, and coal, there was little experience available to draw upon. As a result, after it went into operation, the various production units did not function well together, leading to wasted capacity in some of these units ； The yields of ethylene and propylene from the DCC unit did not meet the design specifications; there is a shortage of 80,000 tons per year of ethylene in the polyethylene unit, and a shortage of 30,000 tons per year of propylene in the polypropylene unit, which results in a reduced load rate of the production units ； In terms of auxiliary facilities, the main installations were designed during construction to handle 3 million tons per year of methanol, in accordance with the requirements set out in Document No. 1295 issued by the Shaanxi Development and Reform Commission for Energy Affairs; there is also a certain degree of flexibility built in. These facilities include coal storage and transportation systems, water treatment plants, air compression stations, chemical storage areas, and acid-base handling facilities. Investments are needed to complete these additional facilities, so as to maximize the return on investment for the assets invested in the first phase and to ensure that the initial investments are reasonable and optimized. At the same time, in order to make full use of the associated gas resources from the Yanchang Group’s oil fields, the project still uses coal and associated gas from these oil fields as raw materials to produce 1.8 million tons per year of methanol, as well as 600,000 tons per year of DMTO, 300,000 tons per year of LDPE/EVA, and 300,000 tons per year of PP. Utility systems and auxiliary facilities are also constructed as part of this project. Shaanxi Yanchang China Coal Yulin Energy Chemical Co., Ltd. is located in the Jingbian Energy Chemical Park in Yangqiaopan Town, 10 kilometers northeast of Jingbian County town. The company was established in May 2010, jointly funded by Yanchang Petroleum Group and China National Coal Energy Group Co., Ltd. Its registered capital is 7 billion yuan, with Yanchang Group holding 70% of the shares and China National Coal Energy Group holding 30%. The company’s board of directors oversees 4 professional committees as well as 25 functional departments, project teams, and centers. It currently has around 2,000 employees. To date, the company has built facilities for the production of methanol from coal (oil field gas) at a capacity of 1.8 million tons per year, as well as facilities for the thermal cracking of heavy residue oil at a capacity of 1.5 million tons per year, along with systems for the comprehensive utilization of the resulting products.