Cost exceeds selling price; Qinghua Coal-to-Gas plans technical upgrades to overcome difficulties

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Costs exceed selling prices; Qinghua Coal-to-Gas plans technical upgrades to address the issue. Author/Source: Date: 2017-06-13 Clicks: 21 Recently, Zhao Qing, deputy head of the Xinjiang Uygur Autonomous Region, Huang Jinzhong and Liang Yong, deputy secretaries-general of the regional people’s government, Hu Kaijiang, secretary of the Party leadership group and director of the regional Economic and Information Commission, Liu Jianguo, executive vice governor of Ili Prefecture, Yang Shengjiang, director of the Ili Prefecture Economic and Information Commission, Yang Xinping, secretary of the Party committee of Yining County, and Li Hua, executive deputy county head, visited Xinjiang Qinghua Energy Group for an inspection. Meng Lingjiang, General Manager of Xinjiang Qinghua Energy Group, along with Deputy General Managers Luo Yinlong, Liu Fusheng, Yang Lixian, and others, accompanied him on the inspection. General Manager Meng Lingjiang gave a detailed report to the inspection team on the production and operation status of Xinjiang Qinghua Group’s 5.5 billion cubic meter coal-to-natural gas project, the process flow, the technical improvement plans for the project, as well as the difficulties the company is currently facing. Meng Lingjiang pointed out that the coal-to-gas production in Qinghua, Xinjiang, is affected by CNPC’s temporary settlement price of 1.15 yuan per cubic meter, which is far lower than the enterprise’s production costs. This results in natural gas costs exceeding its selling price, forcing the enterprises to operate in a situation of high costs and low revenues, leading to severe losses. A company’s basic production and operations are also affected by factors such as natural gas demand regulation and low market prices. Xinjiang Qinghua Group is actively seeking solutions to its difficulties in partnership with China Energy Group Co., Ltd. After comprehensive evaluations of the relevant process technologies and market prospects, it plans to adopt a technical upgrade approach that builds on the first-phase coal-to-gas project by integrating polyolefin production with that project, in order to address the challenges faced by the company at present. Meng Lingjiang emphasized that the enterprises urgently need assistance in resolving the following issues as soon as possible: maintaining stable gas prices, PetroChina’s pressure to reduce prices and production, special subsidies for coal-to-gas projects, ensuring stability in the financial environment, and establishing clean energy industry funds. After listening to Meng Lingjiang’s report, Deputy Director Zhao Qing said, “As the top project in the autonomous region and Ili Prefecture, the Xinjiang Qinghua coal-to-gas project is of great significance for promoting economic development and social stability. We will continue to provide full support as always. You should complete the procedures for technical upgrades to the project as soon as possible, follow through with the project approval process, and obtain approvals from the relevant ministries. At the same time, the relevant departments must fully cooperate with the enterprise in carrying out the project construction in order to accelerate the process of technical upgrades.” ” It is reported that the Xinjiang Qinghua project, with an annual production capacity of 5.5 billion cubic meters of coal-to-natural gas, is a demonstration project for this type of technology. It is one of the first batch of demonstration projects for advanced coal processing during the 12th Five-Year Plan period, and it also serves as a key component in Xinjiang Autonomous Region’s efforts to develop a modern industrial structure. The first phase of the Qinghua project, with an annual output of 1.375 billion cubic meters of natural gas, began commercial operation at the end of 2013, and it has since supplied gas to the West-East Gas Pipeline. Currently, it is the only company that supplies gas to this pipeline. Since establishing itself in Ili in 2009, Xinjiang Qinghua Group has invested a total of over 15 billion yuan. According to estimates by industry experts, taking a coal-to-natural gas project with a capacity of 4 billion cubic meters per year as an example, the construction cost is approximately 20.09 billion yuan. With a coal price of 200 yuan per ton, a catalyst cost of 55 yuan per thousand cubic meters, electricity costing 0.6 yuan per kilowatt-hour, water consumption of 6.3 tons per thousand cubic meters, and water treatment costs of 5 yuan per ton, the final calculated production cost is 1.54 yuan per cubic meter. When coal-based natural gas is transported via pipelines, certain transportation costs as well as business tax and value-added tax must be deducted. In terms of selling prices, at present, the selling prices for gas transported through pipelines and liquefied natural gas produced via liquefaction, as well as gas produced from coal, are all higher than the local natural gas gate station prices, resulting in weaker competitiveness. At present, the production costs in the coal-to-natural gas industry remain high, and the issue of negative profits is prominent.