What new challenges does the modern coal chemical industry face? New opportunities?

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What new challenges does the modern coal chemical industry face? New opportunities? Author/Source: Ruan Lijun, Yang Qian (China Coal Processing and Utilization Association, Beijing 100013) Date: 2018-03-12 Clicks: 46 Abstract: This paper analyzes the new challenges faced by the modern coal chemical industry as well as the various factors that influence its development, discusses the opportunities for further growth in this sector, and outlines the future prospects for its development. Keywords: coal chemical industry ； Techno-economic effects ； Market competition ； Market demand analysis ； Looking ahead, the development orientation and framework for China’s modern coal chemical industry have been basically established. As technological progress and improvements in demonstration projects continue, related issues will be resolved gradually, and there should be no fundamental changes in policy. 1 New challenges and influencing factors facing China’s modern coal chemical industry 1.1 The development orientation of this industry has been clarified In February 2017, the **Energy Administration issued the ‘13th Five-Year Plan for the Development of Advanced Coal Processing Industries’ ； In March, the **Commission for Development and Reform and the Ministry of Industry and Information Technology jointly issued the \"Plan for the Innovative Development and Layout of the Modern Coal Chemical Industry.\" The document states clearly that \"the moderate development of the deep processing industry for coal is not only necessary for **energy strategic technology and capacity reserves, but also an important measure to promote the clean and efficient use of coal and ensure **energy security\". It is necessary to \"develop the deep processing industry for coal into an important part of China’s modern energy system,\" thereby further clarifying the role of this industry at a **strategic level\". **At the 2018 National Energy Work Conference, Nour Bekri, Director of the Energy Bureau, stated regarding the coordinated promotion of clean and efficient coal utilization: \"It is necessary to further shift coal utilization from focusing primarily on its use as a fuel to one that emphasizes both its use as a fuel and as a raw material. We must adhere to the fundamental role of strategic technological and production capacity reserves, develop advanced coal processing on a moderate and orderly basis, and enhance the competitiveness and risk resistance of demonstration projects.\" ” 1.2 Regional Development: Among the four major regions – the east, central, west, and northeast – during the 12th Five-Year Plan period, the west experienced the fastest growth rate, followed by the central region which had a higher growth rate than the east; the northeast, on the other hand, showed a decline in growth. The coal chemical industry in the coal sector is mostly concentrated in the central and western regions, and it will play an important role in driving the development of the coal chemical industry there. Modern coal chemical projects require substantial investment, generate high added value, and incur high taxes and fees per ton of oil products. Developing this industry can effectively boost regional economic development and help major coal-producing provinces optimize and upgrade their industrial structures. 1.3 Clean and Efficient Utilization of Coal: The modern coal chemical industry is a strategic emerging industry that promotes the clean and efficient use of coal as well as the transformation and upgrading of the coal industry; it represents an effective way to extend the coal industry chain. Coal-to-oil and coal-to-gas technologies can convert coal into high-quality, clean oil products and natural gas. Coal-to-chemicals processes enable the full conversion or utilization of elements such as carbon, hydrogen, sulfur, and oxygen present in coal; the amount of gaseous pollutants generated during these processes is much lower than that resulting from direct coal combustion, and some of the carbon can be incorporated into the final products. 1.4 The dependence on external energy sources continues to rise; China has become one of the world’s major consumers and importers of oil and natural gas. In 2016, the reliance on imported crude oil was over 60%, while the reliance on imported natural gas was 36.6%, and this trend shows an upward direction year by year. From January to June 2017, China’s coal-to-oil production capacity reached 6.93 million t/a, with an actual output of 1.55 million t. In 2017, coal-to-oil production is expected to reach 3–4 million tons. According to the 13th Five-Year Plan for Demonstration Projects in the Advanced Coal Processing Industry, the coal-to-oil production capacity was set at 13 million tons per year by 2020. In 2016, national oil production declined by 15 million tons compared to 2015. In 2016, CNPC’s crude oil production decreased by 3.2 million tons compared to 2015, with the Daqing Oilfield accounting for the majority of this decrease. In the first half of 2017, a total of 7.5 million tons of Russian crude oil were imported via the first Sino-Russian oil pipeline, while the designed annual capacity of the second Sino-Russian oil pipeline is 15 million tons. In other words, regarding China’s current oil consumption, the production capacity and output of coal-to-oil remain negligible. However, the current production is already sufficient to compensate for the reduced output of 1 or 2 large domestic oil fields. The planned production capacity by the end of the 13th Five-Year Plan period should essentially be sufficient to offset the current annual decrease in domestic oil production, or even nearly replace the volume of oil imported via the China-Russia pipeline. 1.5 Trends in the International Energy Sector From the perspective of the potential impact of these trends on modern coal chemical industry, the production of shale oil and gas has become an important factor affecting the supply and demand balance in the international oil and gas market. Low-cost shale oil and gas, as well as the low-cost chemical products manufactured from it, could have a certain impact on the production of coal-based chemicals in our country ； The development of new energy transportation vehicles, such as CNG vehicles and electric vehicles, will have a significant substitutive effect on refined petroleum products. 1.6 Fluctuations in international oil prices
The development of the coal chemical industry is closely tied to oil prices. Since July 2014, international oil prices have been continuously declining; at their lowest point, they fell to $27 per barrel. The products of modern coal chemical industry will face competition from three sources: domestic oil-based products, imported manufactured goods, and products derived from imported oil. This undoubtedly places higher demands on the viability and competitiveness of the modern coal chemical industry itself. In the long term, international oil prices will be influenced by various factors, with a high degree of uncertainty; there are also significant differences among various parties regarding predictions for international oil prices in the medium to long term. Recently, international oil prices have exceeded $70 per barrel, which is good news for the development of modern coal chemical industry. 1.7 Water resource constraints: After more than 10 years of pilot development, and with the optimization of process technologies and the rapid improvement in management levels in modern coal chemical projects, water consumption per unit of product has been significantly reduced; however, the total water consumption for these projects remains high. In China, water resources and coal resources are distributed in opposite patterns; modern coal chemical projects are mainly located in the central and western regions where water resources are scarce. The modern coal chemical industry is primarily located in the western regions where coal resources are abundant. The large-scale implementation of numerous modern coal chemical projects will exacerbate the shortage of water resources in these areas, and water has become a key factor restricting the development of this industry. 1.8 Environmental Access Requirements: With the implementation of the new environmental protection laws as well as various special action plans aimed at addressing air pollution, water pollution, soil pollution, etc., the requirements for pollution control in the modern coal chemical industry have become increasingly stringent. It has become more difficult for new projects to obtain approval regarding water use, energy consumption, and environmental standards. Wastewater treatment for modern coal chemical projects presents significant challenges. High-concentration saline wastewater is typically treated by concentrating it through evaporation followed by crystallization, or by natural evaporation in evaporation ponds. However, these evaporation and crystallization processes involve high investment costs and poor operational stability, placing heavy pressures on enterprises. Moreover, the method of natural evaporation in evaporation ponds can no longer meet environmental regulations. 1.9 Pressure to Reduce Carbon Emissions: The implementation of carbon trading or the introduction of a carbon tax in China has become an inevitable trend, and it will affect the overall competitiveness of the modern coal chemical industry. Modern coal chemical projects generate significant amounts of CO2 emissions, and the management of CO2 is an issue that needs to be addressed urgently for the development of this industry. Efforts should be made to study ways of utilizing CO2, taking advantage of the high concentration and ease of use of CO2 produced by modern coal chemical projects, and to explore comprehensive utilization technologies for CO2. 1.10 Demonstration Results The development of China’s modern coal chemical industry has achieved remarkable results, but there are also a number of prominent contradictions and problems that need to be addressed urgently. These include some common issues faced by emerging industries in their early stages of development, as well as specific problems inherent in the growth of the modern coal chemical industry. If these issues are not resolved promptly and effectively, they will affect the healthy development of the industry. The first few large-scale coal chemical demonstration projects carried out in our country were built and put into commercial operation one after another, but based on the actual operating results, there are still some unsatisfactory aspects. 1.11 Product Homogenization At present, the modern coal chemical industry lacks many technologies and products necessary for industrialization and commercial-scale demonstration; only coal-to-olefins, coal-to-oil, and coal-to-ethylene glycol are available. The product portfolios also mainly consist of products such as gasoline, diesel, polyethylene, polypropylene, coal-derived gas, and ethylene glycol. The variety and output of further processed and derivative products are relatively limited, and the product offerings across projects are quite similar. Many coal chemical enterprises struggle to find well-developed products with mature technology, and once a breakthrough is achieved in the technology for a particular product, there is a rush to adopt it. Competing with domestic and international petroleum and natural gas-based chemical products at full market cost prices will become a tough challenge and high requirement for the development of modern coal chemical industry in our country. 1.12 Economic viability: At present, coal-to-oil and coal-to-gas projects suffer from poor profitability due to external factors; however, policy influences do not reflect their actual profitability and future prospects. Coal-to-olefins and ethylene glycol production is relatively cost-effective; it can be said that this sector has withstood the impact of low oil prices. However, there are too many factors that affect a company’s economic efficiency and profitability; temporary profits and losses can provide some insight, but they cannot explain everything. For a company to survive and thrive in the market, it ultimately relies on its own capabilities and strength. Of course, the impact on cost-effectiveness and competitiveness cannot be determined solely through price comparison; various other factors must also be taken into account. 1.13 High investment costs: Modern coal chemical industries require substantial investment, which results in high financial costs and a long payback period. There are many variables during this period, especially the continuous emergence of new cross-border technologies, which is even more unpredictable. Therefore, how to make judgments and plan for future development is a crucial factor affecting the success or failure of modern coal chemical enterprises and even the entire industry. 1.14 Phasing out gasoline vehicles: Recently, many ** and automobile manufacturers have set timelines for phasing out gasoline vehicles, and China has also begun relevant work. This is not only a huge challenge for coal-to-oil production, but also for the entire petrochemical industry. However, this also requires a complex and lengthy process, and issues such as the charging capacity of electric vehicles, infrastructure development, the disposal of used batteries, and whether the supply of resources like lithium and cobalt depends on imports must be resolved first. However, the construction of modern coal chemical industries and their payback periods are relatively long, and technological advancements and breakthroughs during that time are likely to occur at a rapid pace; therefore, careful consideration and handling are indeed necessary. 1.15 Breakthroughs in new energy: In the long run, the greatest threat may still be the industrial application of new energy. Such as combustible ice, dry hot rock, and controlled nuclear fusion, among others. Breakthroughs have been achieved in the preliminary development stages for these, and although there is still a long way to go before they can be put into industrial use, it is now an issue that needs to be addressed. 2 The Future and Potential for Expansion of the Modern Coal Chemical Industry 2.1 Reconsidering the Layout of Modern Coal Chemical Plants Most of the coal chemical projects that have been built or are under construction in China are located in the western region. The advantage of this region is its abundant coal resources and low coal prices, while the disadvantages include a shortage of water resources and long transportation distances for the products. During periods of low energy prices, even cheap coal prices cannot offset the economic difficulties of the project. Coal is a key area for addressing overcapacity; building coal chemical projects in the eastern and central regions no longer faces the issue of competition with thermal coal and other industries for coal resources, as was the case during the 11th and 12th Five-Year Plans. Water scarcity is a bottleneck restricting coal conversion in the western regions, whereas the eastern and central regions have heavy rainfall and well-developed water systems, resulting in less constraint from water resources and easier solutions to water supply issues. Whether modern coal chemical industry can be integrated with comprehensive utilization is closely related to its layout. The western region has a low population density; markets for products such as construction materials made from fly ash are limited. Fly ash disposal is difficult, and most of it can only be stockpiled. In the eastern and central regions, where the population density is high and the economy is developed, the ash can be utilized through various methods such as brick manufacturing, cement production, and road construction, eliminating the need for storage. The by-produced sulfur, sulfuric acid, etc. are also easily usable. The by-product high-concentration CO2 can also be easily used in the sale of food and industrial gases. The development of modern coal chemical industry depends on the availability of coal resources, water resources, talent, and technological reserves. It must be tailored to local conditions; planning concepts should be adjusted to shift from being resource-oriented to market-oriented. 2.2 Future technological directions for modern coal chemical industry At present, innovation-driven development has become the main driving force behind the progress of this industry; new products and technologies continue to emerge, and technological innovation remains the core driver of the development of the modern coal chemical industry. “Since the 13th Five-Year Plan period, the technological innovation capacity in fields related to modern coal chemical industry has continued to improve, with a large number of new research results emerging both domestically and internationally. According to the \"13th Five-Year Plan for Demonstrating Advanced Coal Processing Industries,\" the future technological development directions in modern coal chemical industry include coal-to-oil production through methods such as direct liquefaction, Fischer-Tropsch synthesis, and co-processing with kerosene ； Coal-to-natural gas involves large-scale coal pulverization pressurized gasification, large-scale environmentally friendly fixed-bed slag gasification, fluidized bed gasification, and methanation processes ； Coal-based olefins represent the next generation of technologies, including methanol-based olefin production and one-step olefin production from syngas ； Coal-based aromatics include aromatics produced from methanol, as well as those generated through the combined utilization of coal components ； Coal-based ethylene glycol is used in the production of oxalate esters from syngas, the hydrogenation of oxalate esters, and the one-step synthesis of ethylene glycol from syngas ； Environmental protection includes the efficient treatment of hard-to-degrade wastewater, the treatment and disposal of high-salinity wastewater, and the comprehensive utilization of crystalline salts. 2.3 Comprehensive utilization of resources associated with coal As an industry that consumes large amounts of water, the coal chemical industry generates mine dewatering water as a by-product of coal extraction. Due to a lack of unified management regarding its use and disposal, a significant amount of this excess water is wasted and discharged. It not only wastes precious water resources, but also pollutes the environment. The water quality of mine water in our country is good; it generally does not contain toxic substances, and after treatment, it can be used as production water for the entire facility. Currently, most modern coal chemical projects are located in the coal-rich areas of the northwest, where water resources are scarce. Therefore, making good use of mine water achieves two goals at once. It not only solves the water usage problem within the coal chemical industry itself, but also addresses the issue of unnecessary discharge and waste of mine water, enabling full utilization of this water and bringing about good economic, social, and environmental benefits. 2.4 Strengthen the research, development, and production of ultra-clean coal-derived oil products and specialty oils. Given that coal-derived direct liquefaction oils feature high naphthenic content, low pour point, high density, and low viscosity index, efforts should be made to develop products that are difficult to produce through conventional petrochemical processes. In particular, this includes oils for military and civilian aircraft, space rockets, and special armored vehicles. Such efforts will help meet China’s growing demand for specialty oil products and ensure the needs of national defense construction are fulfilled. Leveraging the characteristic of indirect coal-to-liquid processes, which can produce ultra-clean oil products with no sulfur, low olefin content, and low aromatic content, this method provides high-quality blending components for **clean oil products and oil upgrading**, thereby enabling the production of high-quality and high-value-added products. As the demand for upgraded specialty fuels and oils in our country increases, the advantages of coal-to-oil products will be further highlighted. 2.5 Develop a high-end and differentiated new materials product chain. Currently, most of the coal-based polyolefins produced are low-end bulk products; there are very few specialty grades of polyethylene and polypropylene. Efforts should be made to intensify scientific and technological research on major, key common technologies and equipment, so as to promptly rectify the current situation where end products are largely similar, and foster a new trend characterized by high-end and differentiated end products. The technology for producing ethylene glycol from coal is evolving towards lower costs, higher selectivity, and longer catalyst lifespan. As the product quality continues to improve and downstream users become more receptive to and make greater use of the product, coal-based ethylene glycol has begun to be widely applied in the polyester and chemical fiber industry. 2.6 Advanced Development of Coal-Based Products Coal-based fine chemicals can be defined as products with high added value, high technological content, low consumption, and low emissions; they are manufactured by further processing downstream products derived from syngas produced by large-scale coal chemical plant gasification platforms and other key by-products. The main product lines include syngas chemicals, carbonylation products, hydrogenation products, high-value products derived from methanol, C4 processing products, high-value products from Fischer-Tropsch synthesis, high-value products derived from ethylene propylene, high-value products derived from aromatics, and high-value products utilizing CO2. 2.7 Introducing the most advanced information technologies and approaches to promote the Internet+ approach in the coal industry: Although the coal industry is a fundamental and key sector of China’s energy sector, all its various aspects and processes face severe challenges. In the coal chemical production process, it is necessary to upgrade the production and management systems in order to achieve better factory automation, intelligence, and refined management. Accelerate the transformation and upgrading of the coal industry through intelligent technologies such as artificial intelligence, cloud computing, and the Internet of Things. We are jointly designing and constructing China’s most advanced intelligent factory. Through a combination of new construction and renovation, we aim to comprehensively enhance the safety and environmental friendliness of coal chemical production, thereby achieving the goals of improving product quality, reducing costs, and conserving energy and emissions. 2.8 Industrial Concentration and Scale Development: Given the high barriers in terms of technology, management, cost-efficiency, etc., in modern coal chemical industry, it is particularly important to increase industrial concentration and pursue scale development. **Large enterprises should be encouraged to enter the field of modern coal chemical industry, as well as diversified business models and ownership structures, so that the modern coal chemical industry can develop in a healthy and steady manner. Encourage large enterprises to leverage their existing experience in operating production facilities in order to improve the comprehensive utilization of resources, further increase yields, and reduce energy consumption, water usage, and pollutant emissions. Implement upgrading and renovation projects to promote the scaled, high-end, and refined development of the industry. 2.9 Innovation in the Construction and Operation Models of Modern Coal Chemical Industry Projects. Coal chemical industry projects are characterized by high investment costs, long construction periods, and complex processes. To successfully develop such projects, it is essential to strengthen planning in the early stages as well as risk management. Currently, the owner-led model is the common construction approach for coal chemical projects; in addition, there are also the project management company-led model and several main unit contractor-led models. Model innovation is just as important as technological innovation, and often it can achieve twice the result with half the effort. From the perspective of engineering practice, each project construction model has its advantages and disadvantages; the best model is one that suits the specific circumstances of a project. Owners need to make a reasonable choice after careful evaluation. 2.10 Striving to advance new models for the differentiated and graded utilization of low-grade coal. Compared with direct combustion of coal, the advantage of grading and differentiating the use of low-grade coal lies in the ability to achieve hierarchical utilization of materials and energy, thereby improving the efficiency of coal utilization and increasing its added value. For low-rank coals with a relatively late coalification period, high volatile matter content, and high reactivity, it is necessary to utilize them in a graded manner through technologies such as pyrolysis, semi-coke utilization, and tar hydrogenation. This will help to develop a new model of integrated production of “oil, gas, chemicals, and electricity”, thereby enhancing the overall level of clean and efficient coal utilization. 2.11 Transforming traditional coal chemical industries using modern coal chemical technologies: Most traditional coal chemical industries still rely on conventional gasification techniques, which are not only inefficient and difficult to manage from an environmental perspective, but also require the use of expensive lump coal. Modern coal chemical industry starts at a high level, especially with the development of advanced gasification technologies such as fluidized bed gasification, which allows the use of cheaper pulverized coal, resulting in high efficiency and less wastewater generation. Therefore, the development of modern coal chemical industry should not be confined to itself; advanced technologies must also be applied to other industries. Transforming and upgrading traditional coal chemical industry should be an important direction. 2.12 Promoting the transformation and upgrading of the coking industry: At present, the utilization rate of coke oven gas is only around 70%, and most of it is used in low-level applications without further exploitation; nearly half of this coke oven gas is reused for combustion within the same facility. Coke oven gas has a high hydrogen content, while hydrogen is in short supply in coal chemistry and petrochemical industries; many processes require the production of hydrogen separately or the adjustment of the carbon-hydrogen ratio of the raw materials. Currently, the syngas produced by fluidized bed reactors has a high calorific value and a low unit price. If used to replace coke oven gas for heating, it can free up high-quality coke oven gas for further processing, thereby enriching the downstream industrial chain. 2.13 Entering the gas application sector: The syngas produced by fluidized bed technology, when used as an industrial gas, offers significant cost advantages and excellent environmental benefits. It can be utilized not only in the coking industry but also in many other industries that require industrial gas. 2.14 Addressing the issue of coal quality suitability to achieve coal blending for supply: With current gasification technologies, it is not yet possible for a single gasification method to handle all types of coal, nor has any coal type been found to be suitable for all gasification methods. Therefore, resolving the issue of matching coal types with gasification technologies is a key focus for the progress and development of modern coal chemical technology. Until there is a fundamental change in gasification technology, adapting the relevant gasifiers through coal blending, just as is done with coking coal, should remain the practical choice for modern coal chemical industry. In the future, coal enterprises should not merely engage in simple washing and processing of coal; instead, they must formulate coal blends scientifically based on the needs of various users such as those in the modern coal chemical industry, coking sector, power plants, and those who use bulk coal. This will enable the sale of high-quality, customized products, thus turning such enterprises into centers for the selection and supply of coal products. 2.15 Resource utilization of CO2: Modern coal chemical industries do generate CO2, but the concentration of this CO2 produced during manufacturing is high, making it easy to handle and utilize on a centralized basis. The biggest problem now is that the areas where CO2 is used consume too little of it, not enough to absorb such a large amount of CO2. In the future, efforts should be made to develop ways to utilize CO2; it should not be treated as waste, but rather as a resource to be exploited. To date, several applications of CO2 have seen technological breakthroughs, but they still require validation through industrial implementation. 2.16 Strengthening the integrated development of modern coal chemical industry and petroleum refining industry. Promoting the coordinated development of these two industries not only helps to enhance the overall competitiveness of the modern coal chemical industry but also enables the use of the properties and cleanliness of coal-derived oils to improve the quality of refined products in the petroleum refining industry, thereby reducing refining costs. Given the current overcapacity in the refining industry, it is necessary to actively explore how these two sectors can leverage their respective strengths, adopt a differentiated layout, and integrate for development, thereby achieving product blending and complementary product performance. The two industries coordinate in terms of resource utilization, complement each other’s technological strengths, and integrate their products, thus forging a path for chemical industry development that suits China’s national conditions. 2.17 Integration with Other Industries: Compared to other existing uses of coal, such as power generation, steel production, building materials manufacturing, and decentralized coal combustion, modern coal chemical industry offers advantages such as higher energy conversion efficiency, more efficient utilization of coal, and lower pollutant emissions. It can also drive the upgrading or even revolutionization of related industries. By integrating with related industries, the advantages of modern coal chemical engineering can be leveraged to address the shortcomings in industry development, achieving a win-win outcome. In the future, in line with the principles of a circular economy, integrated coal-to-energy and heat production systems as well as multi-product generation methods should be adopted. Efforts should be made to promote the integrated development of modern coal chemical industry with industries such as coal mining, power generation, petrochemicals, chemical fibers, salt chemicals, and metallurgy and building materials. This will help to extend the industrial chain, strengthen industrial clusters, and improve the efficiency of resource conversion as well as the competitiveness of products.