Taking the pulse of modern coal chemical industry: What problems are most perplexing?

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Taking the pulse of modern coal chemical industry: What problems are most perplexing? Author/Source: Huahua Network Coal Chemicals Date: 2018-01-29 Clicks: 70 Modern coal chemical industries offer a wide range of products, with multiple technical approaches in use. Although progress has been made in terms of technology and industrialization, these industries still face various challenges related to technology, cost-effectiveness, and environmental protection. In a complex market environment, what lies ahead? ——Coal chemical enterprises are in a dilemma. “When developing coal chemical industry, it is necessary to carefully consider and select the right products; otherwise, the process will turn into a liability. ”Jin Yong, a professor in the Department of Chemical Engineering at Tsinghua University and an academician of the Chinese Academy of Engineering, hit the nail on the head during the National Exchange Conference on the Green Development of Coal Deep Processing and Coking Industries held in Xiaoyi, Shanxi. In fact, modern coal chemical industry includes both routes for producing fuels from coal (oil and natural gas), as well as routes for producing hydrocarbons (olefins and aromatics) and ethers (oxygen-containing compounds), with the aim of compensating for the shortages of oil and natural gas. In terms of materials with higher added value, modern coal chemical industry has also made many breakthroughs in ethylene glycol, polymer materials, and fine chemical materials. In addition, the graded and quality-specific utilization of low-rank coal has become an important physical-level development trend in the coal chemical industry. Compared to coal-based fuels, the graded and quality-specific utilization of low-rank coal requires less investment, has lower costs, and exerts less environmental pressure. In recent years, large coal enterprises have made significant progress in modern coal chemical industry demonstration projects, but it is undeniable that modern coal chemistry still faces various challenges in terms of technology, economic viability, and environmental protection. For existing large-scale coal-to-fuel projects, how to become profitable has become a top priority ； The markets for major coal-based chemical products such as coal-derived olefins, coal-derived ethylene glycol, and coal-derived dimethyl ether are complex, characterized by varying degrees of homogenization, and there is a risk of overcapacity ； In terms of the utilization of low-rank coal, although many technological advancements have been made, there are still very few large-scale industrial projects. Modern coal chemical industry offers a wide variety of products, with multiple technological routes coexisting. In an uncertain policy environment and a complex market landscape, how to make investments for returns and achieve transformation and upgrading is a crucial issue facing coal enterprises. The sought-after paraffin – When oil prices are high, it is possible to produce final diesel and gasoline products; but currently, a large portion of the coal-to-oil production carried out by Inner Mongolia Yitai Group Co., Ltd. (hereinafter referred to as “Yitai”) results in intermediate chemicals – paraffin. ”In Dongsheng District of Ordos City, a person familiar with Yitai Coal Chemicals told a reporter from Energy that Yitai’s 1.2 million tons per year fine chemicals project in Hangjin Banner is capable of producing around 900,000 tons of fischer-tropsch synthesized wax, with the amount of finished wax being around 700,000 tons. ” Yitai owns our country’s first coal-to-oil plant with a capacity of 160,000 tons per year, utilizing the coal indirect liquefaction process. According to the data, in 2016 this facility produced a total of 194,500 tons of various oil products; of this amount, only 33.39 tons were diesel, accounting for 0.02%. Meanwhile, the production volume of refined chemical products such as normal paraffin, heavy paraffin, and normal stable light hydrocarbons increased significantly. “The main products include FTO products, coal-based synthetic waxes, and more than a dozen other fine chemical products. The consumption tax on coal-to-liquid products is excessively high. Although Shenhua Ningxia Coal Industry Group Co., Ltd. has requested ** to waive or reduce this tax, no decision has been made yet. Currently, Yitai’s 160,000-ton demonstration project produces these fine chemical products. ”The aforementioned person added. In fact, not only Yitai; many other representative coal-to-liquid enterprises, including Shanxi Lu’an Mining (Group) Co., Ltd. (hereinafter referred to as “Shanxi Lu’an”) and Yankuang Group Co., Ltd. (hereinafter referred to as “Yankuang Group”), have also shifted their focus to fine chemical products such as paraffin. The reason for this is the high consumption tax on coal-to-oil products, as well as their poor economic efficiency; therefore, it is necessary to develop such products in a way that allows for larger production scales and lower costs, so as to replace some of the conventional oil products. Data shows that the unit tax rate for consumption taxes on gasoline, naphtha, solvent oil, and lubricating oils is 1.52 yuan per liter, while the unit tax rate for consumption taxes on diesel, aviation kerosene, and fuel oil is 1.2 yuan per liter. For coal-to-oil projects, the consumption tax for each ton of diesel is around 1,411 yuan, while the consumption tax for each ton of naphtha is about 2,105 yuan. The total business taxes and surcharges amount to approximately 1,746 yuan per ton; consumption taxes alone account for nearly 30% of the total costs. In 2017, after consideration by **seven ministries and commissions, approval was given for a five-year exemption from consumption tax for coal-to-oil demonstration projects; however, no official approval document has been issued to date. http://img.yf116.cn/image/img/20180129/95393558918.jpg The coal-to-oil process is divided into direct liquefaction and indirect liquefaction; currently, the projects that are in operation mainly use indirect liquefaction. Indirect liquefaction is further divided into high-temperature Fischer-Tropsch and low-temperature Fischer-Tropsch processes, and Lu’an and Yitai primarily use the low-temperature Fischer-Tropsch method. However, due to technological constraints, low-temperature Fischer-Tropsch synthesis still primarily produces oil products; even when wax is produced, its volume remains relatively small. “Therefore, if one wants to move toward greater sophistication, work on high temperatures is still necessary. High-temperature Fischer-Tropsch is essentially moving in the direction of greater sophistication; on one hand, it results in products with high added value, and on the other hand, it allows avoidance of high consumption taxes. ”Cui Jun, an analyst at the China Information Research Institute for Chemical Industry, told a reporter from Energy. Currently, Shanxi Lu’an has two coal-to-oil projects: one is the 160,000-ton/year indirect coal-to-oil project undertaken by Shanxi Lu’an Coal-to-Oil Company; the other is the 1.8-million-ton/year demonstration project for the clean utilization of high-sulfur coal, integrating oil production, chemical processing, power generation, and heat supply. From projects with a capacity of 160,000 tons per year to those with a capacity of 1.8 million tons per year, Shanxi Lu’an has used high-sulfur coal to synthesize the world’s first special lubricant base oil derived from coal through proprietary technology – IV high-viscosity lubricant base oil (PAO). In addition, it produces a variety of other sophisticated coal chemical products, such as phase-change waxes and coal-based nylon fibers in different specifications. On the part of Yankuang Group, in line with its coal-to-oil plan, the first phase has seen the construction of an industrial demonstration plant for coal indirect liquefaction with an annual capacity of 1 million tons; this plant uses Yankuang’s own low-temperature Fischer-Tropsch synthesis technology to produce products such as diesel and naphtha. The second step is to construct a large-scale indirect coal liquefaction project with an annual capacity of 4 million tons. This includes an industrial demonstration plant for high-temperature Fischer-Tropsch synthesis with an annual capacity of 2 million tons, and an industrial co-production plant for low-temperature Fischer-Tropsch synthesis also with an annual capacity of 2 million tons. As a result, the overall coal liquefaction capacity will reach 5 million tons per year. This project will take into account the downstream processing and utilization of olefins and oxygenated compounds in order to achieve the co-production of oils and chemicals. In the third step, high-temperature Fischer-Tropsch synthesis technology is used as the main approach, alongside both high- and low-temperature Fischer-Tropsch synthesis techniques, so as to achieve a total production capacity of liquid products at 10 million tons per year. Downstream processing options for naphtha, olefins, and oxygenated compounds are taken into full consideration to optimize the product structure. However, for coal-based oil products, what is their true direction in the long term? “First is to reduce costs; ultimately, it is still necessary to rely on one’s own competitiveness to capture the market. Second is the pursuit of high-end positioning, leveraging features that other products do not have to capture the high-end market. Third is differentiation: fully leveraging the advantages of one’s own products to enter differentiated markets. Of course, relevant policy support is also needed and necessary. ”Ruan Lijun, director of the Coal Chemical Industry Division at the China National Coal Association for Processing and Utilization, said in response to an interviewer from Energy. Coal-to-gas vs. gas shortage: As a counterpart to coal-to-oil, coal-to-gas seems to be in an even more awkward position. There has always been a shortage of natural gas in the country, and its reliance on imports is increasing. Against the backdrop of the shift from coal to gas, this shortage continues to grow. Will this bring new opportunities for the development of coal-to-gas technology? “Coal-to-natural gas is part of unconventional natural gas; it constitutes an important component of China’s natural gas production and represents an effective way to address shortages of gas supplies. However, due to the current mismatch between costs and prices, it requires support from relevant local policies. At the same time, the layout takes into account nearby markets as a whole, rather than just nearby resources. ”Ruan Lijun analyzed and believed. Compared to other coal-to-gas projects, Datang Keqi Coal-to-Gas Project was once the one closest to alleviating the gas shortage. Regarding gas prices, the initial settlement price was 2.75 yuan per cubic meter. Under normal full-load operating conditions, the profit per cubic meter could reach 0.7–0.8 yuan. However, after two price cuts, the current price stands at 1.82 yuan per cubic meter, representing a decrease of approximately 34%. Similar to coal-to-oil projects, constrained by natural gas price regulations and consistently high coal prices, despite the great potential for the development of natural gas, coal-to-gas projects remain costly, and achieving profitability remains a significant challenge. Ruan Lijun believes that there are three reasons why coal-to-gas projects are facing difficulties: first, these projects have not reached their designed production capacities, and the actual output is even lower. Of the 4 coal-to-gas projects that have been completed, apart from Xintian, only the first phase of construction was finished for the rest. However, some basic facilities and projects were completed ahead of the main construction work. Furthermore, the actual output is even lower, with the production load rate generally not exceeding 50%. Second, the cost is higher than the gas price, resulting in a situation where costs exceed the revenue. After **multiple price adjustments, the total cost of coal-based gas is now much higher than the gate price of natural gas. Third, enterprises lack market influence. Coal-to-natural gas is different from coal-based chemicals, as it can be sold in the market. Coal-to-gas production must be fed into the pipeline network, which means that both output and price are subject to restrictions, and one cannot decide on them independently. Among the 4 projects that are currently in operation, the first phase of Datang Keqi Coal-to-Gas Project has an output of 1.335 billion cubic meters per year, the first phase of Xinjiang Qinghua Yili Coal-to-Gas Project has an output of 1.375 billion cubic meters per year, the first phase of Inner Mongolia HuiNeng Coal-to-Gas Project has an output of 400 million cubic meters per year, and the Xinjiang Xintian Yili Coal-to-Gas Project has an output of 2 billion cubic meters per year. In 2016, domestic natural gas production was 137.1 billion cubic meters, while consumption was 205.8 billion cubic meters; even if all four projects that were built operated at full capacity, their output would still be quite limited. The \"13th Five-Year Plan for Demonstrating Advanced Coal Processing Industries\" defines coal-to-gas production as a means to ensure the secure supply of imported pipeline natural gas, to address the issue of transporting energy over long distances from coal-rich regions, and to provide clean gas for industrial use, residential applications, distributed energy systems (including combined cooling, heating, and power generation), and transportation in areas where air pollution control is a priority. This approach serves to replace fuels such as raw coal, low-quality coal, and petroleum coke, thereby helping to reduce emissions of air pollutants. It is expected that by 2020, the production capacity of coal-to-natural gas will reach 17 billion cubic meters per year. During the interview, a reporter from Energy learned that the development of coal-to-gas technology still requires strong policy support; otherwise, it is difficult to achieve genuine progress under the existing domestic oil and gas market conditions. http://img.yf116.cn/image/img/20180129/954393567953.jpg If the development of coal-to-gas production continues at this pace, it will mean an increasing level of losses; some companies involved in this industry have already started considering shifting to other activities, such as the production of olefins or ethylene glycol. “Coal-to-oil products can be used to produce gasoline and diesel, as well as solvents, lubricants, base oils, etc.; relatively speaking, it enables the production of more derivatives. However, the main component of coal-to-gas production is methane, that is, natural gas; meanwhile, some tar or other products are produced as by-products, but in small quantities. The main product remains natural gas. ”Cui Jun believes. Transformation toward refined coal chemical industry: If the shift to oil production from coal was driven by economic considerations, then the transformation of industries such as coal-based olefins and ethylene glycol is more determined by market forces. There is a wide variety of high-value coal chemical products, and the market conditions for these products vary. Some coal chemical products face challenges such as overcapacity, limited market size, and immature technologies. By the end of 2015, China’s production capacity for coal-to-oil, coal-to-natural gas, and coal-to-olefins (including methanol-to-olefins) was 2.54 million tons per year, 3.1 billion cubic meters per year, and 8.62 million tons per year, respectively. The actual production volumes in 2015 were 1.15 million tons, 1.88 billion cubic meters, and 6.48 million tons, respectively. “Homogenization cannot be generalized, as there are many different products in the coal-to-oil chemical industry nowadays, and each product has its own specific industry context. Olefins may currently suffer from significant homogenization, but this is not the case for coal-to-oil and coal-to-natural gas processes. ”Cui Jun said. According to the “2017 Annual Report on Coal-to-Olefins in China” by ICIS China, as of August 2017, a total of 28 coal/methanol-to-olefins projects had been put into operation or successfully undergone trial runs in China, with an aggregate olefins production capacity of 12.9 million tons per year. However, in most coal-to-olefins projects today, the end products are polyethylene and polypropylene, and the market for low-end polyolefin products is highly competitive. Taking polyethylene as an example, there is a severe homogenization phenomenon in the downstream processing projects for olefins produced from coal, such as ethylene and propylene; most polyethylene and polypropylene products are available from a few mainstream brands, while there are very few high-end or specialty brand products. In terms of moving toward higher-end or more sophisticated products, whether the coal chemical industry can succeed in its transformation is also closely related to the overall conditions of the industry. However, high-end products of synthetic polyethylene cannot be replaced; it is not merely a problem related to coal chemical industry, but also involves domestic refining agents, catalysts, petrochemical technologies, as well as the R&D capabilities of research institutions. There are many successful examples of the refined development of traditional coal chemical industries, but the focus of modern coal chemical industry during the 13th Five-Year Plan period remains on demonstration and upgrading; at present, refined development is still primarily at the design and planning stage. “The challenges faced by coal-based products mainly relate to technology and environmental protection, etc. With increased investment and technological progress, these products are becoming more technologically advanced, their environmental impact is decreasing, and the relevant standards are constantly improving. Future new challenges may arise from technological breakthroughs and industrial applications in new energy. ”Ruan Lijun pointed out. Refined development is certainly the direction for the growth of the coal chemical industry, but it may not necessarily solve the fundamental problems. Since the market size for sophisticated products is relatively small, they tend to reach saturation easily, and their target customers as well as sales models differ as well. At the same time, if too many sophisticated product types are offered, additional investment as well as more specialized personnel will be required. Inevitable environmental pressures: Environmental protection has always been an issue that coal chemical industry development cannot avoid. For a long time, high water consumption and the generation of waste materials such as wastewater, exhaust gas, and solid waste have been points of criticism against the coal chemical industry. Most wastewater treatment processes for modern coal chemical projects employ a near-zero discharge approach that includes \"pre-treatment + biological treatment + membrane concentration of wastewater + evaporation crystallization\". The clean water obtained after membrane concentration is reused, while the concentrated brine is sent to evaporation ponds for natural evaporation or to evaporation crystallizers to enable the reduction and recovery of wastewater volume. Evaporation ponds offer advantages such as low disposal costs, simple operation and maintenance, long service life, good resistance to shock loads, and stable operation; for a considerable period of time, most new coal chemical projects have adopted this approach. However, due to their large footprint and the pollution caused by leaks during operation, evaporation ponds, as well as the entire coal chemical industry’s water treatment processes, are under scrutiny. With the implementation of the new Environmental Protection Law and special action plans regarding air, water, and soil pollution, the requirements for pollution control in the coal deep-processing industry will become stricter. It will thus be more difficult for coal deep-processing projects to obtain water, energy, and environmental permits. In the course of its development, modern coal chemical industry is also undergoing changes in areas such as water consumption and wastewater treatment in order to meet environmental protection requirements. “Faced with environmental protection pressures, the industry has been actively investing and making efforts to address these issues, and significant progress has already been achieved. ”Ruan Lijun told the reporters. http://img.yf116.cn/image/img/20180129/95783582835.jpg On December 22, 2015, the Ministry of Environmental Protection issued the \"Environmental Access Requirements for Modern Coal Chemical Industry Projects (Trial)\“. This document stipulates that in areas where there are no suitable waters for wastewater discharge, effective measures must be taken to handle highly saline wastewater, so as to prevent contamination of groundwater, air, soil, and other environments. At the same time, the location selection for evaporation ponds, drying ponds, oxidation ponds, and temporary storage ponds, as well as measures for preventing groundwater contamination and for monitoring, should also follow the \"Standards for Contamination Control of Hazardous Waste Landfills\" (GB 18598), in order to prevent contamination of groundwater. Under increasingly stringent environmental regulations, many coal chemical projects and those currently under approval process by relevant authorities employ evaporation crystallization technology to treat high-concentration brine. In terms of water consumption, taking coal-to-oil production as an example, it originally required 10 tons of water to produce 1 ton of oil through direct coal liquefaction. However, as a result of ongoing improvements, by 2016 the water consumption per ton of oil produced in Shenhua Group’s (now **Energy Investment Group**) Ordos coal-to-oil project had dropped from 10 tons at the time of design to around 5.8 tons; at its best, it was less than 5 tons per ton of oil produced. In addition, our country has committed to reaching a peak in carbon dioxide emissions around 2030 and striving to achieve this goal as soon as possible; the industry involved in the deep processing of coal is also under pressure to reduce carbon emissions. A study published by the international environmental organization Greenpeace, titled \"Estimation of Carbon Emissions from China’s Coal Chemical Industry during the 13th Five-Year Plan Period,\" shows that industrial activities accounted for over 70% of China’s total carbon emissions in 2015; among these, the carbon emissions generated by China’s coal chemical products made up 13% of China’s total industrial emissions. The predicted carbon emission levels for the coal chemical industry by the end of the 13th Five-Year Plan period under the planning scenario, extreme scenario, and forecast scenario are 301 million tons, 409 million tons, and 792 million tons respectively.