Why have modern coal chemical projects been approved and authorized in large numbers recently?

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Why have modern coal chemical projects been approved and authorized in large numbers recently? Author/Source: China Chemical Industry News Date: 2018-08-17 Clicks: 2 Recently, the modern coal chemical industry in China, which had been relatively quiet for some time, has seen significant activity again; a large number of projects are under construction, while another batch of projects is in the planning stage. Compared to the hype and impulsiveness of the first wave of investment boom at the beginning of this century, this time, driven by various factors such as the market conditions and the international environment, the Chinese modern coal chemical industry’s investment boom, which builds on previous achievements, appears to be more mature and reliable. In addition to projects such as Jiutai Energy (Jungar)’s 600,000 tons per year methanol-to-olefins facility, Zhongan United’s 1.7 million tons per year coal-to-olefins facility, and Qinghai Damei Coal Industry’s 1.8 million tons per year methanol-to-olefins facility, which are under active construction, more investment plans for coal chemical projects have been disclosed recently. Last month, Tianjin Bohua Chemical Company’s 2×1.8 million tons per year methanol-to-olefins project was officially launched, with a total investment of 29.4 billion yuan. Sinopec’s 600,000 tons per year coal-based polyolefin project in Zhijin, Guizhou, has been approved for implementation, with a total investment of 16.77 billion yuan. The preliminary work for the 2 million tons per year coal-based clean fuel project in Bijie, Guizhou, is being accelerated. Hubei Energy’s 4 billion cubic meters per year coal-to-gas project has been included in the **13th Five-Year Plan’s key projects. A framework cooperation agreement has been signed for Beijing Haohua Energy’s 600,000 tons per year coal-to-olefins project in Hangjin Banner, Inner Mongolia, with a total investment of around 16 billion yuan. The 1.2 million tons per year coal-based ethylene glycol project jointly developed by Zhejiang Tongkun Group and Shanghai Baosteel Gas was recently signed in Hefei, with a total investment of around 11 billion yuan. The various processes for the 1.8 million tons per year coal-to-ethylene glycol project in the first phase of Yulin Chemical, owned by Shaanxi Coal Group, have been contracted one after another in recent days. Most notably, the leader in the coal chemical industry, **Energy Group**, has announced that it will soon start building the second and third coal direct liquefaction production lines, in order to increase the scale of clean and efficient utilization of coal. It is clear that investment in the coal chemical industry is recovering and accelerating. Some analyses predict that by 2020, investment in coal chemical industry in China is expected to exceed 500 billion yuan. So, what are the differences between the current resurgence in investment in modern coal chemical industry and the first wave of investment enthusiasm at the beginning of this century? As is well known, China’s modern coal chemical industry emerged and grew rapidly alongside the sharp rise in international oil prices at the beginning of this century. At that time, various regions rich in resources across the country became highly competitive, and within a few years more than one trillion yuan was invested to build a large number of modern coal chemical projects. However, with the onset of the international financial crisis in 2008, the crude oil market underwent drastic changes, and the boom in coal chemical industry development in China came to an abrupt halt. Even those projects that had been completed and put into operation struggled to survive in a situation of losses for many years. “\"Lack of rationality before investing, and no profits after investing\" was the overall description of that wave of enthusiasm. But things have changed now. Since 2017, international oil prices have reversed course, with prices in New York currently at a median level of 70 dollars per barrel. Driven by rising oil prices and other factors, the domestic chemical industry is booming; new coal-based chemical enterprises such as Hualu Hengsheng, Luxi Group, and Shanxi Coking have seen significant improvements in their performance. The competitiveness and profitability of coal-to-olefins and coal-to-ethylene glycol processes have become evident, while coal-to-oil production has also generated profits. This should be the most important economic factor driving a revival in investment in modern coal chemical industry. For example, **the energy group decided to expand its coal-to-oil production because the oil yield is expected to increase by about 10% after the expansion, which will lower the break-even point based on crude oil prices to $50 per barrel. Profit has always been the best catalyst for investment. Another factor in the international environment that cannot be ignored is also important. China’s current dependence on imported crude oil is approaching the critical threshold of 70%, and against the backdrop of the United States’ efforts to contain China’s rise, energy security has become an even more urgent and complex issue. Under the direct planning and manipulation of the United States, the Middle East is currently in chaos, and there is a high risk of international oil prices rising out of control in the future – exactly what the United States wants to see. Furthermore, as the Sino-US trade war intensifies and the international environment becomes more hostile, the issue of energy security becomes all the more critical. Where lies the path to energy independence for China? In addition to continuing to expand oil supply channels internationally, it is likely to be a very important trump card to timely increase the production capacity of domestic modern coal chemical industries as a precaution for future needs. 　　 Following this logic, over the past decade or so, **for reasons related to environmental protection, water resources, technology, etc., policies have consistently been oriented toward restraining and curbing the development of modern coal chemical industry. However, with the sudden changes in the international landscape, it is intriguing to wonder whether there will be significant adjustments to the policies. Recently, modern coal chemical projects have seen accelerated approval and authorization; will there be further policy benefits in areas such as taxes, resources, and innovation in the future? Let’s wait and see. It should be noted that in the new wave of investment in modern coal chemical industry, coal (methanol)-based olefin production holds a dominant position, and this is the result of market choices. In the future, if oil prices continue to rise, coal-based ethylene glycol, coal-based oil and gas, coal-based aromatics, coal-based ethanol, and similar products will also gradually emerge and come to the forefront. Modern coal chemical industry is a powerful tool for China to mitigate international oil risks, and this is precisely the time to build up capabilities for future use. Moreover, after more than a decade of development, modern coal chemical industry has seen significant improvements in terms of technical processes, safety and environmental protection, economic efficiency, and product performance. Therefore, “having confidence before investing and being able to make a profit after investing” is likely to become the new slogan for this wave of investment in modern coal chemical industry.