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The prospects for Yanchang Petroleum’s expansion into the coal chemical industry remain uncertain; the project has not started four years after it was approved. Author/Source: Date: 2018-04-08 Clicks: 2 Shaanxi Yanchang Petroleum (Group) Co., Ltd. (hereinafter referred to as “Yanchang Petroleum”) has made another move in the field of coal chemicals. On March 28, 2018, Yanchang Petroleum and Huadian Coal Industry Group Co., Ltd. (hereinafter referred to as “Huadian Coal Industry Group”) held a signing ceremony for the management agreement regarding coal chemical enterprises in the Yulin area. Yan’an Petroleum told a reporter from China Business News that the signing of this agreement meets the strategic needs of the company’s industrial development. It not only helps to address Yan’an Petroleum’s shortcomings in the aromatics industry in Shaanxi and even in the Northwest region, but also helps to enrich and expand the company’s existing industrial areas, extend its industrial chain, and increase added value. This holds significant strategic importance for the structural adjustment and transformation of Yan’an Petroleum’s business. However, Yanchang Petroleum did not provide responses regarding the specific details of the trusteeship arrangement and the proportion of the coal chemical sector in the company’s revenue. On April 3, 2018, our newspaper’s reporter called Huang Guodong, the head of the publicity department at Yanchang Petroleum, regarding the above issues, but also did not receive a positive response. According to insiders at Yanchang Petroleum, this is not the first time the company has entered the coal chemical industry; previously, its subsidiaries such as Yanchang Petroleum Yan’an Energy Chemical Company (hereinafter referred to as “Yan’enhua”), Shaanxi Yanchang Zhongmei Yulin Energy Chemical Co., Ltd. (hereinafter referred to as “Yulin Energy Chemical”), and Shaanxi Yanchang Petroleum Yulin Coal Chemical Co., Ltd. (hereinafter referred to as “Yulin Coal Chemical”) had all been involved in coal chemical activities. Therefore, from a technical perspective, there is no problem. Managing Huadian Projects “The two parties have had multiple discussions regarding CNPC’s management of Huadian Yulin coal chemical project. ”A person from an energy company in northern Shaanxi told a reporter from China Business News that on January 19, 2018, Yanchang Petroleum and Huadian Coal Industry Group signed a letter of intent for cooperation on the Huadian Yulin coal-based aromatics project and the associated coal mines. At the signing ceremony, in addition to all the senior executives from both companies being present, several officials from Shaanxi Province and Yulin City also attended the event. Furthermore, the source revealed that the aforementioned project is operated by Huadian Yuheng Coal Chemical Co., Ltd., which is part of Huadian Coal Industry (hereinafter referred to as “Huadian Yuheng Company”). The company is primarily responsible for the implementation of the Huadian Yulin coal resource circular economy comprehensive utilization project; the relevant procedures were filed with the Shaanxi Provincial Development and Reform Commission on December 5, 2010. According to public information, the HuanDian Yulin coal chemical project includes facilities for producing 3 million tons of coal-based methanol per year, as well as 1 million tons of coal-based aromatics per year; in addition, a coal mine with an annual production capacity of 10 million tons is to be built as part of this project. At the same time, supporting projects and auxiliary facilities such as downstream deep-processing units and back-pressure heat-electric generation units for comprehensive utilization are also planned. A pilot plant for producing aromatics from methanol on a ten-thousand-ton scale will be built, with a total investment of around 38 billion yuan. However, after the project was registered in 2010, the related projects of Huaneng Group progressed slowly, with work stopping and resuming from time to time, until they were officially launched on April 18, 2014, at the ceremony marking the simultaneous commencement of key projects in the Northern Shaanxi Energy and Chemical Industry Base. Regarding the slow progress of the Huaneng Yulin coal chemical project, journalists have visited the Yulin area on multiple occasions. Local officials admitted that there are two reasons for the slow progress of this project: firstly, the investment required is enormous, and Huaneng hopes to bring in strategic partners to help carry out the project ； Second, the project has failed to obtain the **necessary approvals for a long time. As a result, the commissioning of the HuanDian coal chemical project keeps getting delayed. By reviewing public information, the reporter found that in early 2016, the then Ministry of Environmental Protection issued a response regarding the approval authority for the environmental impact assessment report of the Huadian Yuheng coal-based aromatics project, stating clearly that such assessments for this project were to be approved directly by the Ministry of Environmental Protection. This means that the relevant approvals previously obtained by HuanDian in Shaanxi are considered invalid. Subsequently, in late June 2016, HuanDian announced that the project approval report had been reviewed by the Shaanxi Provincial Development and Reform Commission, which agreed to issue an approval decision after obtaining the necessary environmental impact assessment documents. Once the environmental impact assessment report for this project is finalized, it will be submitted to the Ministry of Environmental Protection for approval; the water resources assessment report has also been submitted for approval. Additionally, in July 2014, HuanDian Group’s Yulin million-ton coal-based aromatics project entered into a strategic partnership with Tianlong Group (4.980, -0.10, -1.97%) and Shaanxi Yitai Energy. In accordance with the agreement reached by the three parties at that time, they would work together to ensure the successful commissioning of the first industrial project for coal-based aromatics production. So, to date, has the HuanDian Yulin coal chemical project obtained all the necessary approvals, and has its original strategic partner fulfilled its commitment to make the investments? In response to this, our reporter called Huadian Group. A woman in charge of media relations there said that the group was unaware of the matter regarding CNPC’s takeover of Huadian Yulin’s coal chemical operations, declined to comment, and suggested referring to official announcements, before hanging up the phone. On April 3, 2018, reporters sought clarification from Huang Guodong, head of the publicity department at Yanchang Petroleum, regarding the details of extending Yanchang Petroleum’s management of the Huadian coal chemical project and whether the project had obtained the necessary approvals, but did not receive a response. Share-profit coal chemical industry? In Shaanxi Province, in addition to CNPC’s Changqing Oilfield Branch (7.460, -0.03, -0.40%), Yanchang Petroleum also holds an important position, being known as China’s \"fourth oil source\". However, in recent years, as the oil resources within the blocks allocated to Yanchang Petroleum have continued to decline, the company has embarked on a path of \"diversification\". Among them, the coal chemical industry is a key area for its development efforts. According to insiders at Yanchang Petroleum, the company currently has three subsidiaries—Yaneng Chemical, Yulin Energy Chemical, and Yulin Coal Chemical—that handle its coal chemical operations, with investments amounting to hundreds of millions of yuan. According to information released by Yanchang Petroleum, the Huadian Yulin coal-based aromatics project is included in plans related to the deep processing of coal. It is tasked with carrying out the first industrial-scale demonstration of the world’s pioneering coal-based methanol-to-aromatics technology (FMTA). Taking over will help improve the technical level in the field of coal chemical industry. On April 4, 2018, our newspaper’s reporters called HuaDian Yuheng Company and were informed that HuaDian relies on Yanchang Petroleum for almost all of its coal chemical projects in Yulin; it was not clear whether the associated coal mines are also under the management of Yanchang Petroleum. The reporter learned from various sources that in recent years, in order to strengthen its coal chemical business, Yanchang Petroleum has secured access to coal resources such as the Xiwan open-pit coal mine, the Bolo coal mine, and the Weiqiang coal mine within Shaanxi Province. Among them, the Xiwan open-pit coal mine was established with joint investment from Shenhua Group and Yanchang Petroleum, with Shaanxi Shenyan Coal Company responsible for the project construction. The coal mine received approval from the National Development and Reform Commission in November 2013; its construction capacity is set at 10 million tons per year, with a dedicated railway line to be built as well. The total investment for this project amounts to 6.088 billion yuan. This means that the extended petroleum cross-border coal chemical industry is not short of coal. According to documents obtained by the reporter, in 2017, the company’s revenue from gas and chemical products increased by 16.6% on a year-on-year basis. Among them, the production of polyolefins was 1.388 million tons, representing a growth rate of 10%. Furthermore, there are several coal chemical projects under construction at present; once they come online, they will become the main source of profit growth for Yanbian Petroleum. “The reason why Yanchang Petroleum was able to achieve cross-sector success in just a few years is closely tied to its regional advantages. ”A vice president of a local energy company told reporters that Yulin in Shaanxi is known as \"China’s Kuwait\" due to its abundant coal resources, and Yanjiang Petroleum being the \"eldest child\" of Shaanxi’s State-owned Assets Supervision and Administration Commission, it naturally receives \"care\" from all aspects of the local authorities.